The problem with analysts is that they are just too anal. They focus too much on the numbers and ratios, and forget about the big picture.
Listening to the NVIDIA conference call is ridiculous. The thing that concerned them the most was missing it's gross margins by 110 basis points, bringing it down to 44.9%. So what?
What I care about is how NVIDIA will continue its competitive edge in the industry. I can sacrifice a few pennies per share here and there on things called R&D if it will increase its market power and future earnings.
I loved NVIDIA's CEO, Jen Hsun, comment saying that he would hire 100% more people tomorrow if he could find the talent. He understands what driving his company's success, while the analysts are worried about counting the beans.
NVIDIA is the great company it is today, because it can produce better GPUs than all its competition. It is the undisputed leader, and needs to focus every effort it has in maintaining its position. It has done this by having the most experienced engineers in graphical computing, not by cutting costs.
If you don't have the technology leadership in this business, financial ratios don't matter. Cutting costs are vital, but you shouldn't sacrifice your long term competitive edge for a short term gain.
I don't care too much about Q2 performance like all the short sighted analysts. What is more important is NVIDIA's numbers in 2009, 2010 and beyond. In a rational world, stocks are worth the value of discounted cash flows, not whether they miss a single quarter by a penny.
The only good thing about analysts is that they help make the markets inefficient giving you opportunities for profit. You can't make money if everyone agrees with you.
I was hoping that NVIDIA would rise on higher expectations, but I guess I have to wait for the company to deliver proof in the future.
Patience... Goddammit
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