Q2 Preview: NVIDIA (NVDA) Hopes GPU Can Reverse Course on Stronger Sales
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Price: $826.32 +3.71%
Rating Summary:
50 Buy, 11 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Rating Summary:
50 Buy, 11 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Shares of graphics chipmaker NVIDIA (Nasdaq: NVDA) are making a nice rebound Thursday afternoon heading into its second-quarter earnings release.
After the market closes, NVIDIA is expected to report earnings of 25 cents per share on revenue of $1.01 billion. Earnings would be a 7.4 percent decline from 27 cents per share last quarter, but a massive increase from non-GAAP earnings of 3 cents per share reported in the same period last year.
Shares fell 31 percent through the quarter and are down just 4.8 percent since. The stock is down 14.4 percent since the start of 2011. NVIDIA has traded in a range of $8.65 to $26.17 over the last 52 weeks, and with shares trading in the mid-$13s, this might suggest further upside for NVIDIA.
When estimating for NVIDIA, investors might get some color from peer Advanced Micro Devices (NYSE: AMD). Earnings for AMD, on an adjusted basis, were 9 cents per share, just edging out the consensus of 8 cents. AMD attributed the results to increased microprocessor shipments.
Take the results with a bit of salt, though, as NVIDIA's quarter shifts forward one month compared with AMD. Further, AMD and NVIDIA do not end up in the same devices all the time, meaning AMD might have seen a bigger demand from their customers alone.
But an increase in demand is always a welcome sign, and NVIDIA is still a top-dog in the graphics processing segment. Plus, AMD has a solid graphics processing unit in ATI, which it acquired in 2006 for $5.4 billion.
Investors will probably focus on NVIDIA's GPU segment, which encompasses it's Tegra set as well as other offerings. Revenue last quarter slipped 18 percent to $637.6 million. NVIDIA is trying to push Tegra into more mobile applications, but the popularity of Apple's (Nasdaq: AAPL) iPad is limiting rapid growth. Tegra is already being utilized in several mobile offerings by companies like Samsung and Motorola (NYSE: MMI).
Data from Bloomberg shows 10 analysts with a Buy rating, 23 with a Hold, and 3 suggesting to Sell. The price target average is $19.30, with a low of $12 and high of $30.
Analyst Commentary
After the market closes, NVIDIA is expected to report earnings of 25 cents per share on revenue of $1.01 billion. Earnings would be a 7.4 percent decline from 27 cents per share last quarter, but a massive increase from non-GAAP earnings of 3 cents per share reported in the same period last year.
Shares fell 31 percent through the quarter and are down just 4.8 percent since. The stock is down 14.4 percent since the start of 2011. NVIDIA has traded in a range of $8.65 to $26.17 over the last 52 weeks, and with shares trading in the mid-$13s, this might suggest further upside for NVIDIA.
When estimating for NVIDIA, investors might get some color from peer Advanced Micro Devices (NYSE: AMD). Earnings for AMD, on an adjusted basis, were 9 cents per share, just edging out the consensus of 8 cents. AMD attributed the results to increased microprocessor shipments.
Take the results with a bit of salt, though, as NVIDIA's quarter shifts forward one month compared with AMD. Further, AMD and NVIDIA do not end up in the same devices all the time, meaning AMD might have seen a bigger demand from their customers alone.
But an increase in demand is always a welcome sign, and NVIDIA is still a top-dog in the graphics processing segment. Plus, AMD has a solid graphics processing unit in ATI, which it acquired in 2006 for $5.4 billion.
Investors will probably focus on NVIDIA's GPU segment, which encompasses it's Tegra set as well as other offerings. Revenue last quarter slipped 18 percent to $637.6 million. NVIDIA is trying to push Tegra into more mobile applications, but the popularity of Apple's (Nasdaq: AAPL) iPad is limiting rapid growth. Tegra is already being utilized in several mobile offerings by companies like Samsung and Motorola (NYSE: MMI).
Data from Bloomberg shows 10 analysts with a Buy rating, 23 with a Hold, and 3 suggesting to Sell. The price target average is $19.30, with a low of $12 and high of $30.
Analyst Commentary
- Goldman Sachs sees earnings of 27 cents per share for NVIDIA. Goldman notes NVIDIA lost about 20 basis points of desktop GPU in the second-quarter, which was below the firm's estimate of a 200 basis point falloff. NVIDIA gained 890 basis points of market share in notebook GPUs sequentially, well ahead of Goldmans 500 basis point estimate. Further, Goldman notes, "Nvidia’s chipset share was down as the desktop chipset market (and Intel’s chipset shipments) continues to decline given Intel’s ongoing transition to its Sandy Bridge integrated CPU/GPU product. Nvidia’s chipset shipments were 0.6 mn units below our estimate."
Overall, Goldman's looking for an in-line report, as relative sales strength in July compared with April could help offset some desktop GPU weakness. Goldman also said its finds, "...the meaningful decline in the desktop GPU market concerning, as we believe it signals (1) a faster decline in the GPU attach rate than we were forecasting, and (2) continued weakness in the PC market."
- Deutsche Bank is modeling for earnings of 26 cents per share on revenu of $1.01 billion. Into the quarter, Deutsche comments, "we expect the Consumer segment to grow +6% q/q, followed by GPU +2% q/q and Professional Solutions +1% q/q. Lastly, we expect NVDA's quarter benefitted by roughly $40m q/ q from a full quarter of INTC royalty payments."
Looking ahead, Deutsche sees third-quarter revs of $1.1 billion and earnings of 28 cents per share. They "expect continued growth in the Consumer segment (DBe +13% q/q) and Royalty payments (+8% q/q), macro conditions have clearly become more challenging and are likely to lead the company to issue and incrementally more conservative outlook."
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