Q3 Preview: Analysts Even-Keeled into NVIDIA's (NVDA) Results, But Cautious on Outlook

NVIDIA Corporation (Nasdaq: NVDA) shares have traded in positive territory for most of Thursday's session ahead of the chip maker's third-quarter report, expected out after the market close. NVIDIA will hold a webcast at 5pm EST following the release, which you can access by clicking here.

The Street is looking for NVIDIA to report earnings of 26 cents per share on revenue of $1.06 billion. NVIDIA reported a gain of 32 cents per share last quarter and EPS of 15 cents in the same period last year.

Shares fell nearly 22 percent through the quarter but have bounced about 14 percent since. NVIDIA has traded within a range of $11.47 to $26.17 over the last 52-week time frame.

Excluding cash, NVIDIA is trading for about 9.2x next year's earnings estimates, toward the richer side when compared with 4.9x for Advanced Micro (NYSE: AMD) and 8.3x for Intel (Nasdaq: INTC).

Data from Bloomberg has 11 analysts with a Buy rating on NVIDIA, 23 at Hold, and three with a Sell. The Street price target average is $17.40, with a low of $11 and high of $40.

Analyst Comments

• Goldman Sachs is expecting NVIDIA to come in below guidance, based on recent data from Mercury research. Mercury said discrete GPU market growth of 3 percent sequentially was below Goldman's estimate for 17 percent of growth. NVIDIA gained about 110 basis points in desktop GPU growth and lost 350 basis points in notebook GPUs. Goldman was looking for 160 bp in desktop and just a 60 bp loss in notebooks. Goldman commented, "In total, Nvidia’s desktop and notebook GPU sales were below our estimate by 3.5 mn units."
  
  Goldman also sees risk for NVIDIA's fourth-quarter outlook and fiscal 2013. On the outlook, Goldman said, "Recall that Nvidia provided guidance for FY13 sales of $4.7-$5.0 bn in September, which we believe assumes a 12% yoy growth rate in consumer PC units, relative to our expectation of 8%."
  
  
• Wedbush is looking for in-line results, modeling for earnings of 24 cents per share on revenue of $1.041 billion. However, Wedbush issued some color on fourth-quarter guidance. The firm is cautious on the outlook, seeing impacts from "(1) OEM’s rebalancing of tablet inventory, (2) choppy smartphone demand trends, (3) impact to PC supply chain from Thailand floods, and (4) macro uncertainties."
  
  Over the long-term, Webush is bullish, seeing NVIDIA benefit from "(1) Tegra ramp, (2) strong generation of CFFO, (3) Icera acquisition providing increased silicon footprint, and (4) stable GPU attach rates driving Y/Y revenue and earnings growth in FY:13E."
  
  
• Deutsche Bank sees earnings of 26 cents per share and revenue of $1.1 billion. "By segment, we expect the Consumer segment to grow +14% q/q (full inclusion of Icera, +$10m q/q), followed by GPU +12% q/q and Professional Solutions +4% q/q. We expect NVDA's chipset revenue to decline -65% q/q. Lastly, we believe royalty payments (Intel+gaming console) will remain roughly flat q/ q at $66m in F3Q."
  
  For the fourth quarter, Deutsche is also cautious given the macro environment, which should cause NVIDIA to issue light guidance. Deutsche states, "Incremental risk is likely greatest in our GPU segment assumption given CPU vendors guiding for only +3% q/q growth (slightly below our +4% est for NVDA)."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out NVIDIA's past performance at Streetinsider's NVIDIA Income Statement.

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