Graphics chipmaker NVIDIA NVDA is set to release second-quarter fiscal 2018 results on August 10 after market close. As it has been one of the hottest stocks this year, let’s take a look to its fundamentals ahead of earnings release.
NVIDIA has been on a stellar run so far this year, hitting multiple highs and locking in gains of about 59.5%, outperforming the industry by a wide margin. This trend is likely to continue given the positive earnings revision trend, which is generally a precursor to an earnings beat, and attractive fundamentals though earnings surprise is difficult to predict at this time.
Inside Our Methodology
Nvidia has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%, which makes surprise prediction difficult. According to our surprise prediction methodology, a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) when combined with a positive Earnings ESP makes us confident in predicting an earnings beat. A Zacks Rank #4 or 5 (Sell rated) company is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The videogame-gear specialist saw positive earnings estimate revision of three cents over the past 90 days for the fiscal second quarter. Additionally, the company’s earnings surprise history is robust with a positive earnings surprise of 27.07% on average over the past four quarters. It is expected to post solid earnings growth of 55.97% and revenue growth of 37.05% in Q2 (see: all the Technology ETFs here).
Further, the stock belongs to a solid Industry Rank in the top 8% with an impressive Growth Style Score of B. However, a Value and Momentum Style Score of F look unfavorable. According to the analysts polled by Zacks, Nvidia has an average target price of $133.25 with more than 57% giving a Strong Buy or a Buy rating ahead of the company’s earnings.
NVIDIA is at the forefront of the artificial intelligence (AI) revolution with its combination of deep learning, software algorithms and powerful GPUs (graphics processing units). With exceptional growth in its AI revolution, it wouldn’t be surprising if the graphics chipmaker soon becomes the industry leader. Additionally, the graphic chipmaker is seeking an additional revenue stream with booming cryptocurrencies.
Given growing demand from cryptocurrency miners, the focus will be on the Nvidia developed cryptocurrency-specific graphics-processing units, or GPUs. According to several reports, the explosion in new cryptocurrency would boost graphics-card makers like Nvidia as their chips are used for cryptocurrency mining (read: Bitcoin Soars to Record High: Fork, Futures and ETFs Explained).
ETFs in Focus
Given positive estimate revisions and Nvidia's attractive fundamentals, investors could focus on ETFs having the largest allocation to this graphics chipmaker. Below are seven ETFs with the highest allocation to NVDA that could make a compelling play ahead of the earnings report:
iShares PHLX Semiconductor ETF SOXX
This ETF offers exposure to 30 U.S. companies that design, manufacture and distribute semiconductors by tracking the PHLX SOX Semiconductor Sector Index. Out of these, NVDA takes the top spot with 9.5% allocation. The fund has amassed $1.1 billion in its asset base and charges a fee of 48 bps a year. The fund has a Zacks Rank of 1 with a High risk outlook.
AdvisorShares New Tech and Media ETF FNG
This is an actively managed ETF designed to invest in companies that are driving economic growth in the modern era, and can adapt to changing leadership by maintaining the ability to invest in the next generation of technology and media companies leading the equity markets. It seeks to provide a similar return stream to the performance of technology and media equity leaders as characterized by the FANG stocks acronym. This approach results in a basket of 28 stocks with Nvidia taking the third spot at 9.2% allocation. FNG has newly debuted in the space last month having amassed $18.8 million in its asset base and comes with a high expense ratio of 0.85% (read: Is the New FANG-Themed ETF Well Timed?)
Global X Robotics & Artificial Intelligence ETF BOTZ
This product seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles. It tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index and holds 30 stocks in its basket with Nvidia occupying the second position with 7.6% share. BOTZ has AUM of $306.2 million and charges 68 bps in annual fees.
ARK Industrial Innovation ETF ARKQ
This is an actively managed ETF seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvement and advancements in scientific research related to robotics, energy storage, innovative materials, alternative energy sources, infrastructure development, space exploration, autonomous vehicles and 3D printing. This approach results in a basket of 40 stocks, with NVIDIA occupying the third position with 6.5% share. The product has accumulated $66.7 million in its asset base and charges 75 bps in fees per year.
VanEck Vectors Semiconductor ETF SMH
This is one of the popular and liquid ETFs in the semiconductor space with AUM of $886.9 million. The fund provides exposure to 26 global securities by tracking the MVIS US Listed Semiconductor 25 Index. NVIDIA occupies the third position with 6.1% of assets. While U.S. firms dominate the fund’s holdings with 76.1% assets, Taiwan (12.4%), the Netherlands (9.8%) and Bermuda (1.4%) round off the top four in terms of country exposure. The fund charges an expense ratio of 0.36%. It has a Zacks Rank of 1 with a High risk outlook (read: Semiconductor ETFs to Roar Higher As Q2 Earnings Unfold).
Huntington EcoLogical Strategy ETF HECO
This is an actively managed ETF that offers exposure to ecologically focused companies that have positioned their business to respond to increased environmental legislation, cultural shifts toward environmentally conscious consumption, and capital investments in environment-oriented projects. It holds 42 stocks in its basket with NVIDIA taking the top spot at 6.1% of assets. Expense ratio comes in at 0.95%. The fund has AUM of $8.3 million.
PowerShares Dynamic Semiconductors Fund PSI
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in the basket. NVIDIA occupies the top position and makes up for 5.76.2% share in the basket. PSI has AUM of $276.2 million and charges 63 bps in annual fees and has a Zacks Rank of 1 with a High risk outlook.
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ISHARS-PHLX SEM (SOXX): ETF Research Reports
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ARK-INDUS INNOV (ARKQ): ETF Research Reports
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
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GLBL-X ROB&ART (BOTZ): ETF Research Reports
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