Yellow flags of Nvidia – RealMoney

After exploring Nvidia's (NVDA) results and reviewing the call Thursday, it's no wonder that the title oscillates unchanged on Friday. The bulls win the arm wrestling by a small margin and I expect it to hold. In fact, if NVDA can trade above $ 163.50, I think buyers can gain momentum.

The initial reaction to higher earnings last night resulted in an immediate increase in shares of $ 10. This lasted until NVDA passed the first part of the prepared remarks section of the teleconference. As the CFO provided its second-quarter guidance, essentially matching Wall Street's expectations, the company announced that it would no longer provide forecasts beyond the current quarter.

Beat! $ 6 was spent in the blink of an eye after office hours. It was the first yellow flag for me.

Nvidia added that the second half should be stronger, which is integrated into Wall Street's current expectations and that the company wants this to happen. Unfortunately, none of us knows what these expectations are. The call went from optimistic to more reserved when the company talked about giving up the one year forecast.

The second yellow flag took the form of Nvidia's discussion of China and the question of whether she believed China could interfere in the Mellanox deal (purchase of NVDA (MLNX)). The company has done a remarkable job in avoiding the issue. Rather than answer directly, Nvidia first spoke about the benefits of the agreement. Then they added that they did a lot and meant a lot to China.

Investors must therefore believe that Nvidia's business in China is worth more than China, THE COUNTRY, as a whole, positioning itself in the best possible way to negotiate the ongoing trade war. This comment has bothered me more than the withdrawal of the company's forecasts beyond the quarter. Note that Mellanox shares are trading again today. The stock is 9.2% lower than the cash redemption price, which is expected to close in less than seven months. This is a huge discount for a cash transaction.

And it is a lot of money for Nvidia. Fortunately, the company has solid free cash flow, but the agreement with MLNX will nibble the current coffers.

With this in mind, it is important to note that the appeal has also taken place. The games performed much better than expected. The game is the heart and soul of Nvidia, so it is good to see it surpass. In addition, the Company has resolved many of its inventory issues and expects them to be late by the end of the quarter or early next quarter; However, what remains is minor.

The deeper passage into the sport esport and the subscription game that allows players to play high level games on basic systems taking advantage of the cloud is 100% a step in the best direction of the game. Esports represents the future of the game and the modeling of subscriptions should maximize the visibility and margins for Nvidia.

Returning to Mellanox, Nvidia made it clear that the company was fully utilizing artificial intelligence (I.I.) and data science once agreed with Mellanox. From the point of view of society, this is necessary and for the future, but the question of how profitable this company will be. We are seeing more and more companies using machine learning and AI to help e-commerce and customer service, but Nvidia wants to go even further in the field of data science, the evolution of AI The first results This initiative is promising.

Finally, the car continues to register with growth slower than expected. It will come, but I think it will be in three or five years and not in two or three years before this segment of society really increases the results. A catalyst, certainly, but it will not release NVDA from its current collapse in 2019.

Overall, nothing in the report makes me want to scream "buy the shares". Again, there is nothing that requires shares to be sold short. Bulls can pick coins to argue their buying argument, while bears can do the same. That is why we are seeing an undecided move today. This is the same reason I will be sidelined in the near future until I am clearer on the commercial side or the technical table offers an exchange.

(Nvidia is a participation in Jim Cramer's Action Alerts PLUS member club.) Do you want to be alerted before Jim Cramer buys or sells NVDA? Learn more now.)