Nvidia
Nvidia Corp. investors will need to see continued strong growth in the chipmaker’s two largest segments — gaming and data center — to make up for challenges facing its auto- and cryptocurrency-related sales as shares hover around record levels.
Nvidia is scheduled to report first-quarter earnings after the closing bell on Thursday.
Gaming revenue at Nvidia is expected to surge 57% to $1.61 billion from the year-ago period, according to FactSet, with data-center revenue expected to jump 60% to $656 million.
Recent strong earnings from Intel Corp. driven by cloud-computing sales indicate that Nvidia’s estimated growth in that key market may be conservative, said Raymond James analyst Chris Caso in a recent note. Nvidia competitor Advanced Micro Devices Inc. also had a blowout quarter recently.
“While it’s difficult to quantify a direct relationship between Intel and Nvidia cloud sales, general trends suggest cloud data-center investment remains strong – and with common cloud workloads requiring a multiple of GPU vs. CPU, we could see continued step-function growth Datacenter demand – well in excess of the ~50% y/y growth modeled for FY19,” the analyst said. Caso has an outperform rating on Nvidia.
Nvidia showed off how it plans to expand the use of AI technology into new areas at its GPU Technology Conference in late March, as it halted testing of self-driving cars.
Auto-related revenue is forecast to slip 0.4% to $139.5 million. Also, data visualization revenue is estimated to rise 21% to $248.1 million, and PC and mobile OEM revenue is expected to rise 3.2% to $161 million.
Earnings: Of the 23 analysts surveyed by FactSet, Nvidia on average is expected to post adjusted earnings of $1.46 a share, up from the 96 cents a share expected at the beginning of the quarter. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of $1.76 a share.
Revenue: Wall Street expects revenue of $2.89 billion from Nvidia, according to 25 analysts polled by FactSet. That’s up from the $2.46 billion forecast at the beginning of the quarter. Nvidia predicts revenue of $2.84 billion to $2.96 billion. Estimize expects revenue of $2.98 billion.
Stock movement: Shares have advanced nearly 15% since the company last reported earnings, compared with a 7.7% rise in the PHLX Semiconductor Index and a 3.3% gain in the S&P 500 index over the same period. Shares of Nvidia touched an all-time high of $254.50 back on March 13, and closed at a record high of $250.48 back on March 16.
What analysts are saying: Susquehanna Financial analyst Christopher Rolland, who has a neutral rating on Nvidia, raised his target price on the stock to $230 from $200 on Tuesday and expects better-than-expected results and outlook from the company. Rolland noted:
| We expect the company to post slightly better results and outlook, as mining-related sales (we estimate ~$200 million, or 6-7% of sales) and channel restocking should drive better than expected Gaming. We expect modest upside from Datacenter as our checks for the new 32GB V100 cards were strong. In addition, through our PC-SIGnals data, we note higher gaming ASPs for NVIDIA GPUs but slightly lower model share in desktops and aftermarket GPUs in C1Q18. |
MKM Partners analyst Ruben Roy, who has a neutral rating and a $245 price target, said continued momentum for Nvidia is already priced into the stock given that shares have significantly outperformed the SOX index over the past quarter. He notes:
| Continued positive industry data points and semiconductor peer commentary on data center demand trends suggest that the momentum that NVDA has been seeing in recent quarters in that segment is likely to continue in the near-term. As well, we think that Gaming segment trends held up reasonably well despite concerns over the potential for meaningful declines in crypto related GPU sales. |
RBC Capital analyst Mitch Steves, who has an outperform rating and a $285 price target, said investors will see how new cryptomining hardware from Bitmain will impact Nvidia sales. Steves, however, thinks that will be overlooked “considering the tailwinds from core gaming, Data Center and Auto.”
Of the 32 analysts who cover Nvidia, 17 have buy or overweight ratings, 13 have hold ratings and two have sell or underweight ratings, with an average price target of $252.68, only 1.5% higher than Tuesday’s trade.