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Category: Stock Market and Nvidia
Date: 14 February 2020 Stock Price: $270.78 We take a look at the 4th 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 4th quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Total revenue: $3.105 billion up from $2.205 billion from the same quarter of the previous year)
- Revenues increased by 40.8% over the last 12 months
- Cost of revenues: $1.090 billion (up from $998 million for the same quarter of the previous year)
- Cost of revenues increased by 9.2% over the last 12 months
- Net income: $950 million (up from $567 million for the same quarter of the previous year)
- Diluted earnings per share: $1.53 (up from $0.92 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 621 million (up from 619 million for the same quarter of the previous year)
- Cash and cash equivalents: $10.897 billion
- Cash and cash equivalents per share: $17.54
- Cash and cash equivalents makes up 6.4% of Nvidia's market capital
- Cash and cash equivalents makes up 62.9% of Nvidia's total assets
- Accounts receivable: $1.657 billion
- Accounts receivable makes up 10.56% of Nvidia's total assets
- Inventories: $1.204 billion
- Inventories makes up 9.6% of Nvidia's total assets
- Shareholders equity in Nvidia: $12.204 billion
- Shareholders equity per Nvidia share: $19.65
- Nvidia is trading at 13.7 times its shareholders equity. The number is relatively high considering that most firms tend to trade at between 2 and 4 times their shareholders equity
- Cash generated from operations: $1.465 billion
- Cash generated from operations per share: $2.35
Nvidia's management commentary on their 4th quarter 2020 earnings
SANTA CLARA, Calif., Feb. 13, 2020 NVIDIA (NASDAQ: NVDA) today reported revenue for the fourth quarter ended Jan. 26, 2020, of $3.11 billion, up 41 percent from $2.21 billion a year earlier, and up 3 percent from $3.01 billion in the previous quarter
“Adoption of NVIDIA accelerated computing drove excellent results, with record data center revenue,” said Jensen Huang, founder and CEO of NVIDIA. “Our initiatives are achieving great success.
“Adoption of NVIDIA accelerated computing drove excellent results, with record data center revenue,” said Jensen Huang, founder and CEO of NVIDIA. “Our initiatives are achieving great success.
“NVIDIA RTX ray tracing is reinventing computer graphics, driving powerful adoption across gaming, VR and design markets, while opening new opportunities in rendering and cloud gaming. NVIDIA AI is enabling breakthroughs in language understanding, conversational AI and recommendation engines ― the core algorithms that power the internet today. And new NVIDIA computing applications in 5G, genomics, robotics and autonomous vehicles enable us to continue important work that has great impact. “We are well positioned for the greatest technology trends of our time,” he said.
NVIDIA will pay its next quarterly cash dividend of $0.16 per share on March 20, 2020, to all shareholders of record on Feb. 28, 2020.
Outlook
NVIDIA’s outlook for the first quarter of fiscal 2021 does not include any contribution from the pending acquisition of Mellanox Technologies, Ltd. Discussions with China’s regulatory agency, the State Administration for Market Regulation, are progressing, and NVIDIA believes the acquisition will likely close in the early part of calendar 2020.
While the ultimate effect of the coronavirus is difficult to estimate, the company has reduced its revenue outlook for the first quarter of fiscal 2021 by $100 million to account for its potential impact.
NVIDIA will pay its next quarterly cash dividend of $0.16 per share on March 20, 2020, to all shareholders of record on Feb. 28, 2020.
Outlook
NVIDIA’s outlook for the first quarter of fiscal 2021 does not include any contribution from the pending acquisition of Mellanox Technologies, Ltd. Discussions with China’s regulatory agency, the State Administration for Market Regulation, are progressing, and NVIDIA believes the acquisition will likely close in the early part of calendar 2020.
While the ultimate effect of the coronavirus is difficult to estimate, the company has reduced its revenue outlook for the first quarter of fiscal 2021 by $100 million to account for its potential impact.
- Revenue is expected to be $3.00 billion, plus or minus 2 percent.
- GAAP and non-GAAP gross margins are expected to be 65.0 percent and 65.4 percent, respectively, plus or minus 50 basis points.
- GAAP and non-GAAP operating expenses are expected to be approximately $1.05 billion and $835 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 9 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 $22.34 and its currently trading at $270.78. Thats a massive 1 114.3% return provided by Nvidia stock over the last 5 years.
The stock of Nvidia is currently trading at a lot closer to its 52 week high of $273.48 than it is to its 52 week low of $132.60 which to us is a clear indication that the short term sentiment and momentum of Nvidia's stock is very positive at this point in time.
The stock of Nvidia is currently trading at a lot closer to its 52 week high of $273.48 than it is to its 52 week low of $132.60 which to us is a clear indication that the short term sentiment and momentum of Nvidia's stock is very positive at this point in time.
Recent coverage of Nvidia (NASDAQ:NVDA)
The extract below shows recent coverage of Nvidia as obtained from TheStreet.com
A jump in demand from cloud giants helped Nvidia comfortably top analyst estimates. On Thursday afternoon, the GPU giant reported January quarter (fiscal fourth quarter) revenue of $3.11 billion (up 41% annually, following a 24% drop in the year-ago period), GAAP EPS of $1.53 and non-GAAP EPS of $1.89. Those numbers respectively beat consensus analyst estimates of $2.96 billion, $1.34 and $1.67.
Nvidia also guided for April quarter revenue of $3 billion, plus or minus 2%. Though Nvidia says it cut this outlook by $100 million to account for coronavirus-related uncertainty, it’s still above a $2.85 billion consensus. Nvidia’s stock rose 5.2% in after-hours trading to $284.85, making new 52-week highs in the process. Shares are now within striking distance of an all-time high of $292.76 (set in Oct. 2018).
Read the full article here
A jump in demand from cloud giants helped Nvidia comfortably top analyst estimates. On Thursday afternoon, the GPU giant reported January quarter (fiscal fourth quarter) revenue of $3.11 billion (up 41% annually, following a 24% drop in the year-ago period), GAAP EPS of $1.53 and non-GAAP EPS of $1.89. Those numbers respectively beat consensus analyst estimates of $2.96 billion, $1.34 and $1.67.
Nvidia also guided for April quarter revenue of $3 billion, plus or minus 2%. Though Nvidia says it cut this outlook by $100 million to account for coronavirus-related uncertainty, it’s still above a $2.85 billion consensus. Nvidia’s stock rose 5.2% in after-hours trading to $284.85, making new 52-week highs in the process. Shares are now within striking distance of an all-time high of $292.76 (set in Oct. 2018).
Read the full article here
Nvidia (NASDAQ: NVDA) latest stock valuation
So based on the earnings report of Nvidia (NASDAQ: NVDA) what do we value Nvidia stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target price (full value price) for Nvidia at $179.50 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 usually suggest that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $179.50. A good entry point into the stock of Nvidia would therefore be at $161.50 or below.
Since the stock of Nvidia is trading at well above our suggested entry point into the stock we rate them as AVOID at its current price
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 usually suggest that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $179.50. A good entry point into the stock of Nvidia would therefore be at $161.50 or below.
Since the stock of Nvidia is trading at well above our suggested entry point into the stock we rate them as AVOID at its current price
Next earnings release of Nvidia
It is expected that Nvidia will release their 1st quarter 2021 earnings report in middle May 2020