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Category: Stock Market and Nvidia
Date: 16 September 2019 Stock Price: $181.94 We take a look at the 2nd quarter earnings release of their 2020 fiscal year of parallel computing and graphics card maker, Nvidia
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About Nvidia
NVIDIA’s (NASDAQ: NVDA) invention of the GPU in 1999 sparked the growth of the PC gaming market, redefined modern computer graphics and revolutionized parallel computing. More recently, GPU deep learning ignited modern AI ― the next era of computing ― with the GPU acting as the brain of computers, robots and self-driving cars that can perceive and understand the world
Overview of Nvidia's latest earnings report
The numbers we are interested in (for the quarter):
- Total revenue: $2.579 billion (down from $3.123 billion from the same quarter of the previous year)
- Revenues decreased by -17.4% over the last 12 months
- Cost of revenues: $1.038 billion (down from $1.148 billion for the same quarter of the previous year)
- Cost of revenues decreased by -9.48% over the last 12 months
- Net income: $552 million (down from $1.101 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.90 (down from $1.76 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 616 million (down from 626 million for the same quarter of the previous year)
- Cash and cash equivalents: $8.475 billion
- Cash and cash equivalents per share: $13.75
- Cash and cash equivalents makes up 7.6% of Nvidia's market capital
- Cash and cash equivalents makes up 57.36% of Nvidia's total assets
- Accounts receivable: $1.561 billion
- Accounts receivable makes up 10.56% of Nvidia's total assets
- Inventories: $1.204 billion
- Inventories makes up 8.14% of Nvidia's total assets
- Shareholders equity in Nvidia: $10.336 billion
- Shareholders equity per Nvidia share: $16.77
- Nvidia is trading at 10.8 times its shareholders equity. The number is relatively high. Most firms tend to trade at between 2 and 4 times their shareholders equity
- Cash generated from operations: $936 million
- Cash generated from operations per share: $1.52
Nvidia's management commentary on the results and earnings guidance
NVIDIA today reported revenue for the second quarter ended July 28, 2019, of $2.58 billion compared with $3.12 billion a year earlier and $2.22 billion in the previous quarter. GAAP earnings per diluted share for the quarter were $0.90, compared with $1.76 a year ago and $0.64 in the previous quarter. Non-GAAP earnings per diluted share were $1.24 compared with $1.94 a year earlier and $0.88 in the previous quarter.
“We achieved sequential growth across our platforms,” said Jensen Huang, founder and CEO of NVIDIA. “Real-time ray tracing is the most important graphics innovation in a decade. Adoption has reached a tipping point, with NVIDIA RTX leading the way. “NVIDIA accelerated computing momentum continues to build as the industry races to enable the next frontier in artificial intelligence, conversational AI, as well as autonomous systems like self-driving vehicles and delivery robots,” he said.
NVIDIA’s outlook for the third quarter of fiscal 2020 is as follows:
“We achieved sequential growth across our platforms,” said Jensen Huang, founder and CEO of NVIDIA. “Real-time ray tracing is the most important graphics innovation in a decade. Adoption has reached a tipping point, with NVIDIA RTX leading the way. “NVIDIA accelerated computing momentum continues to build as the industry races to enable the next frontier in artificial intelligence, conversational AI, as well as autonomous systems like self-driving vehicles and delivery robots,” he said.
NVIDIA’s outlook for the third quarter of fiscal 2020 is as follows:
- Revenue is expected to be $2.90 billion, plus or minus 2 percent.
- GAAP and non-GAAP gross margins are expected to be 62.0 percent and 62.5 percent, respectively, plus or minus 50 basis points.
- GAAP and non-GAAP operating expenses are expected to be approximately $980 million and $765 million, respectively.
- GAAP and non-GAAP other income and expense are both expected to be income of approximately $25 million.
- GAAP and non-GAAP tax rates are both expected to be 10 percent, plus or minus 1 percent, excluding any discrete items. GAAP discrete items include excess tax benefits or deficiencies related to stock-based compensation, which are expected to generate variability on a quarter by quarter basis.
Nvidia (NASDAQ: NVDA) stock price history
The image below shows the stock price history of Nvidia (NASDAQ: NVDA) for the last 5 years. And its been a excellent 5 years for stockholders of Nvidia. 5 years ago the stock was trading around $18.90 and today its trading at $181.94. Thats a massive 857% return provided by Nvidia stock over the last 5 years. While the returns over the last 5 years is impressive it has been struggling in recent months. An indication of this is the fact that group is trading at a lot closer to its 52 week low of $124.46 than it is to its 52 week high of $292.76 which is a clear indication that short term sentiment and momentum of Nvidia stock is negative.
Recent coverage of Nvidia (NASDAQ:NVDA)
The extract below shows recent coverage of Nvidia as obtained from Zacks
It has been about a month since the last earnings report for Nvidia (NVDA - Free Report) . Shares have added about 22.3% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Nvidia due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
NVIDIA Q2 Earnings and Revenues Top Estimates
NVIDIA’s second-quarter fiscal 2020 non-GAAP earnings per share of $1.24 topped the Zacks Consensus Estimate of $1.15 but dropped 36% from the year-ago period. However, the bottom line improved 41% sequentially. Meanwhile, revenues of $2.58 billion beat the Zacks Consensus Estimate of $2.55 billion but declined 17% year over year. However, the top line rose 16% sequentially.
The better-than-expected results can be attributed to strength in automotive, gaming plus OEM and IP end-markets. However, weaknesses in data center market were a spoiler. Nonetheless, as the company witnessed a sequential progress across all its end-markets, management expects the business to have “normalized”.
Top-Line Details
Revenues at the GPU Business fell 21% year over year to $2.1 billion, reflecting deterioration in the gaming and data center GPUs. However, on a sequential basis, the metric grew 4%. Tegra Processor Business revenues worth $475 million inched up 2% on a year-over-year basis and 140% sequentially, driven by higher Automotive revenues. However, lower shipments of SOC modules for gaming platforms were a dampener.
On the basis of market platform, Gaming revenues were down 27% on a year-over-year basis to $1.3 billion due to decreased shipments of gaming desktop GPUs and SOC modules for gaming platforms. However, the same was up 24% sequentially, backed by better SOC modules for gaming platforms, gaming notebook GPUs and GeForce RTX SUPER gaming GPUs. Notably, the launch of Super line of gaming GPUs is making the management optimistic. The rising momentum in the games supporting the ray-tracing feature is a positive.
Meanwhile, revenues from Data Center deteriorated 14% year over year to $655 million as hyperscale customers witnessed soft sales from the segment. However, 3% sequential growth was generated from a rise in enterprise revenues, aided by expanding AI workloads. Automotive revenues in the reported quarter totaled $209 million, reflecting a 30% year-over-year and a 26% sequential increase. This upside was boosted by autonomous vehicle development deals and the solid uptake of AI-based smart cockpit infotainment solutions. Most importantly, a new development service agreement, mostly with Volvo, has been a key driver.
Moving to Professional Visualization, revenues climbed 4% year over year and 9% sequentially to $291 million. Strength across mobile workstation products is a key catalyst. OEM and IP revenues dipped 4% year over year to $111 million due to the absence of crypto-currency mining GPU sales. However, the same grew 16% sequentially owing to an uptick in shipments of embedded edge AI products
Read the full article here
It has been about a month since the last earnings report for Nvidia (NVDA - Free Report) . Shares have added about 22.3% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Nvidia due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
NVIDIA Q2 Earnings and Revenues Top Estimates
NVIDIA’s second-quarter fiscal 2020 non-GAAP earnings per share of $1.24 topped the Zacks Consensus Estimate of $1.15 but dropped 36% from the year-ago period. However, the bottom line improved 41% sequentially. Meanwhile, revenues of $2.58 billion beat the Zacks Consensus Estimate of $2.55 billion but declined 17% year over year. However, the top line rose 16% sequentially.
The better-than-expected results can be attributed to strength in automotive, gaming plus OEM and IP end-markets. However, weaknesses in data center market were a spoiler. Nonetheless, as the company witnessed a sequential progress across all its end-markets, management expects the business to have “normalized”.
Top-Line Details
Revenues at the GPU Business fell 21% year over year to $2.1 billion, reflecting deterioration in the gaming and data center GPUs. However, on a sequential basis, the metric grew 4%. Tegra Processor Business revenues worth $475 million inched up 2% on a year-over-year basis and 140% sequentially, driven by higher Automotive revenues. However, lower shipments of SOC modules for gaming platforms were a dampener.
On the basis of market platform, Gaming revenues were down 27% on a year-over-year basis to $1.3 billion due to decreased shipments of gaming desktop GPUs and SOC modules for gaming platforms. However, the same was up 24% sequentially, backed by better SOC modules for gaming platforms, gaming notebook GPUs and GeForce RTX SUPER gaming GPUs. Notably, the launch of Super line of gaming GPUs is making the management optimistic. The rising momentum in the games supporting the ray-tracing feature is a positive.
Meanwhile, revenues from Data Center deteriorated 14% year over year to $655 million as hyperscale customers witnessed soft sales from the segment. However, 3% sequential growth was generated from a rise in enterprise revenues, aided by expanding AI workloads. Automotive revenues in the reported quarter totaled $209 million, reflecting a 30% year-over-year and a 26% sequential increase. This upside was boosted by autonomous vehicle development deals and the solid uptake of AI-based smart cockpit infotainment solutions. Most importantly, a new development service agreement, mostly with Volvo, has been a key driver.
Moving to Professional Visualization, revenues climbed 4% year over year and 9% sequentially to $291 million. Strength across mobile workstation products is a key catalyst. OEM and IP revenues dipped 4% year over year to $111 million due to the absence of crypto-currency mining GPU sales. However, the same grew 16% sequentially owing to an uptick in shipments of embedded edge AI products
Read the full article here
Nvidia (NASDAQ: NVDA) latest stock valuation
So based on the earnings report of Nvidia (NASDAQ: NVDA) and their fiscal outlook provided for their 3rd quarter what do we value Nvidia stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for Nvidia at $154.20 a stock. We therefore feel that the stock is overvalued and we would not recommend long term fundamental or value investors buy into the stock right now. We would suggest looking to get into the stock at 10% or more below our target (full value) price. Thus a good entry point would be around $138.80