By K C Ma and Bilal Hashmi
Following Intel’s (INTC) lower second half guidance, a disappointing Nvidia's first quarter earnings result (ER) may be a foregone conclusion. Technically, there has been no good news for Nvidia since its fourth quarter earnings release. But there's evidence that the market looked beyond the immediate negativity (Point B Figure 1A) but saw a better second half 2019 (Point A in Figure 1A). Before the recent surprising new tariffs, the bull thesis is that organic gaming demand after crypto fades out will easily overcome the fading macro impact from China slowdown. First quarter consensus is mixed. The sales are expected at $2.2 billion which is 31% lower than in 2018. With 1Q gross margin seen at 59% and EPS of $0.81, the second half is projected to get better as 2Q sales are guided to $2.54 billion and EPS to $1.12 (Table 1). More importantly, Nvidia’s over 30X PE already has priced in a better 2019.