NVDA's Record Quarter, META's Legal Win - theStreet Pro Weighs In

Hey everyone, it is Julie here with Tip Ranks and I once again had the pleasure of being joined by Jason Meshnik who is the CEO over at the Street Pro and today we are diving in to two very bigname stocks with Nvidia and Meta who both are making headlines this week. So Jason, thank you so much for joining me today to break down these big stocks. >> Thanks for having me, Julie. It's always a pleasure. >> Of course. Now we're going to start off with Nvidia, of course, the most anticipated earning support of the season. a real gut check for the markets there and they did beat across the board. So we had earnings per share of $222, well ahead of estimates revenue at 96.2 billion coming in about 4 billion ahead of expectations. So how significant is a beat of this size at Nvidia's scale? >> No, I I think the the big thing is a beat like this is always going to be very significant. It shows continued strong demand and and growth in AI. So that that story is just continuing. What's also interesting to me though is that the stock was down initially, right? They they came out with the with the announcement and then the stock actually fell and the reason why the stock continued or started to rally, why it turned around is that uh it was forward guidance that got people excited and that might be because this is the first time in years that they have actually gone and released some forward guidance. >> Yeah. So, let's jump right into that guidance. Uh because they're expected to grow their revenue by approximately 70% in fiscal 2028. uh their Q3 guidance came in at 108 billion give or take a bit and that guide was assuming zero data center compute revenue from China. So what is your read on this guidance and potentially a hidden upside catalyst with those China sales? >> Yeah, so I think I think the China sales is interesting as far as it being hidden. You know, one thing is well they they did put it out there, right? So, so on many levels, all the good analysts are going to take that information into account and and uh and aggregate that. But, you know, it might also be the fact that Nvidia, which you know, they're a pretty positive company and they're not shy about saying how great they're they're doing and about how great they think they're going to do. So, if they're not willing to go out on a limb on China, maybe that just means that China is not would not necessarily be that great for them. you know, for for one thing, one thing that I read is that, you know, China might be dilutive to their margins. So, so it might actually shrink uh shrink their margins um if they were selling to China. So, I think what we might see is that by the time Nvidia starts going deep into China, uh it might be the time that all of their other higher margin businesses have been exhausted. >> Sure. And another thing we saw was their data center revenue hitting $89 billion up 117% year-over-year. Is that kind of pace of growth sustainable moving forward? >> You know, I was thinking about that. I think it's it's a great question. Um, and you know, what is sustainable here? These these numbers are so absurd, right? They're they're so big. And I remember when I was studying for the CFA program years ago, there was this one article that they made us read and it was something about uh, you know, the one thing that you need to know to be a successful investor. And I was I was so excited to read this because I thought this was here we are. This is this is the magic formula. And then as I started reading this article, I was so disappointed because all it said was watch return on equity and companies that have really big return on equity, really big ROE in the future tend to have smaller ROE and and vice versa. If they have small ROE, so it's just about mean reversion and and so you know, is this sustainable? I think you're going to have some level of mean reversion. When is it? I don't know. Is it next year? Is it 2028? Is it 2030? Um, I think really what we have to do is just continue to watch and see what the company says and and and just see. But one of the things that I thought was really interesting here is that the company's talking about how they are currently, you know, supply constraint, right? So they can sell everything that they make. So, so for now, uh, that's a really positive thing. But at the same time, getting back to what we're talking about with margins and and China, one of the things that Rev Shark said today in his piece on Nvidia is that well, they're they're margins are actually forecast to decline from about 75% to 72%. So that does indicate some kind of pricing pressure, right? He he said it's actually a cost pressure, right? that their inputs, there's inflation around their inputs, but at the same time, it tells me that they can't just pass on that inflation to their customers, or at least they're anticipating not being able to. So, we might be seeing the the first bits of that uh margin compression. >> And then, as we mentioned, the stock did drop slightly out of the gate as it has done for the last few reports, but is now up over 7% today. So, this is their first gain post earnings from the last several. and analysts have been largely increasing their price targets across the board. So over on the Street Pro team there, are we feeling pretty bullish still on Nvidia looking forward? >> Uh let's just say as always because we have a great team that has looks at many different things. We're a little bit mixed. Uh and the two people who have or at least had positions today uh were Chris Versace who still has his position. So he has and has had a one rating on Nvidia and uh and that stock makes up about 3% of our portfolio. So it's it's currently like a let's call it a slight overweight uh kind of a you know neutral to slight overweight and and he maintains a buy rating. So he's always looking for the right opportunities to buy shares in Nvidia. And then on the other side, we have Doug Cass. And you know, Doug is such a trader. And so when when Nvidia, you know, blocked up on the open and then continue to rally, well, Doug sees that as an opportunity to sell short. Doug is not shy about being a skeptic around AI and Nvidia and and the amount of growth that we've seen in the valuations as well as some of the circular financing that's going on, which Nvidia talked about today. So, we're playing both sides of it. On the the short side of the trading, we are short and on the longer term side of of uh investing, we are long. >> Very good. Now, the other stock we're going to talk about is Meta. And they've had some pretty big headlines this week, but I think probably a bit overshadowed by Nvidia. Now, they had just settled a 29 state lawsuit for roughly 17 billion, cutting short their Oakland trial. So what is your reaction to the the size in terms of this deal? >> So it's it's pretty interesting. So yeah, again there there were 29 states that were alleging that the company's products, including Instagram, those products were designed to addict young users. So they settled for just just shy of 17 billion. I think it's they have to pay $12 billion now and then a billion dollars in each of the next few years. and and so the the big settlement was and and they denied any wrongdoing as they typically do in these settlements. Uh however, they did agree to uh put limits on teen usage. It's something like two hours a day for Instagram and Facebook. Um, what's really interesting though is that some people are saying that this might be a way to kind of kneecap some of their competitors because they're saying, "Hey, you know, if we're going down this path and we have to put uh limits, restrictions on teen usage, well then shouldn't Tik Tok and and Snap um Snapchat have to do the same?" And arguably teens spend more of their time on those platforms. So, um it's just their way of I think Meta sharing some of the some of the wealth uh going around. So, the other thing is that uh teens only account for approximately 1% of revenues to Meta. So, you know, maybe maybe this isn't that big a deal from an advertising perspective, but they were hoping to catch them early and and often. >> That's fair. Yeah. Uh and then the stock has been down about 17% year to date, but did jump up a little bit on the news of the settlement. Does removing this legal overhang change the street pros view on the stock or is it sell the relief rally situation? >> Yeah, you know, Sarge when he when he saw the news yesterday jumped in and bought some shares and then he said he pretty immediately sold it luckily because because the stock has has been down since then, right? Um you know, we're not we're not seeing much of a a relief rally here. So, uh, you know, I don't know if shares are going to head back to, you know, that 550ish support that we've been talking about, but, uh, but they're but they're definitely we're not we're not getting the giant pop that that I think many people were expecting this this to be a catalyst for them to move move forward. >> Sure. And beyond this settlement, I mean, the core fundamental story hasn't changed. They have the heavy capital spending with their reality labs and AI infrastructure. Uh the stock's trading I think it's around 17 times forward earnings. Well, Wall Street's average price target is near $750. So that implies a good bit of upside. So does the valuation look more attractive at these levels? >> You know, all right. So um it is starting to look reasonable, I think. So you know, it's still it's still 3% of the portfolio already. So uh you know, for Chris Versace, he's watching it very closely. Let's let's just call this sort of a market weight position for him. and and and really what the one thing that he said that it kind of comes down to not so much, you know, this uh this lawsuit, what it comes down to is uh what they say about the cloud compute business that they that they teased recently. In general, our other team members were a little bit more skeptical about the company. They're looking to buy this buy shares uh if at all 10 to 15% lower. You know, 430 450 was a level that people seem to be pretty interested. So, you know, basically the company is worried that there's no real vision for the future. Uh, and they need to make some some solid announcement about what their future plans are. >> Yeah. And I read in one of the Street Pros recent articles that there were concerns about no big catalysts coming up for the Meta stock until potentially into the fall into their October earnings. So, this the settlement now is a bit of a catalyst. Not too much happened. So, they're sitting back and waiting for for something bigger now. >> Yeah. you know, people will sit back and wait and see what the next round of earnings are. You know, a lot of the skepticism comes from what the company has done with when they've tried to innovate, they've been pretty unsuccessful, right? You know, their their uh meta AI world, they they blew $90 billion on it and and and so people are just saying they they don't seem to really know what they're doing when it comes to innovation. and and so so that's something that people are really really worried about here until they can actually show that this is something that they can do. Perhaps Meta is just becoming more of a a mature company. >> Fair. All right. Well, perfect, Jason. I so appreciate your insights today on these bigname stocks. A lot to digest this week with all the news coming in. For all of our viewers, if you want to learn more, you can head on over to the Street Pro and read some of the contributors recent articles and to see how Wall Street analysts are weighing in, you can head on over to tip ranks as well. Jason, thanks so much for your time. Thank you, Julie. It's always always fun. Yeah.