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NVIDIA Earnings Preview: Here’s What to Look For

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NVIDIA Corporation (NVDA) is scheduled to report first-quarter Fiscal 2022 earnings on May 26 after the market closes. Over the past year, shares of the pioneer of GPU-accelerated computing have rallied over 79% and are currently trading at over $625. A strong set of numbers could continue to explode shares, so let’s take a closer look at what analysts on the Street are expecting.

Earnings Preview

NVIDIA is expected to report EPS of $3.28 on revenues of $5.38 billion, while the company guided for revenues of $5.3 billion (+/-2%).

At its annual Investor day in April, NVIDIA’s CFO Colette Kress said, “While our fiscal 2022 first quarter is not yet complete, Q1 total revenue is tracking above the $5.30 billion outlook provided during our fiscal year-end earnings call. We are experiencing broad-based strength, with all our market platforms driving upside to our initial outlook.”

Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $3.49 per share.

Prior Period Results

In the previous quarter, the company reported adjusted earnings of $3.10, up 64% from the same quarter last year. That said, the result topped the consensus estimate of $2.81. In addition, revenue jumped 6% to $5 billion and outpaced analysts’ expectations of $4.82 billion. (See NVIDIA stock analysis on TipRanks)

Factors To Watch For

NVIDIA specializes in products and platforms for the growing markets of gaming, professional visualization, data center, and automotive, among which gaming and data center performed stupendously in 2020. NVIDIA RTX is witnessing a major upgrade cycle as gamers are attracted to ray tracing, DLSS, and AI.

Notably, the gaming and data center market platforms have witnessed strong demand due to the pandemic-induced work-from-home and online-learning trend. The increasing adaptation of cloud-based solutions has strengthened the data-center business. Additionally, continued strong uptrend in the A100 universal AI data center graphics processing units (GPUs) across hyperscale customers and vertical industries, for AI training and inference, are likely to have been catalysts during the to-be-reported quarter.

Furthermore, the gaming laptop market has skyrocketed in the past seven years and gaming revenue continues to benefit from a favorable mix shift. That said, gamers and creators keep upgrading to higher-end GPUs, which are being benefited from the ramp of GeForce RTX 30 Series based on the NVIDIA Ampere architecture. The rising demand for the company’s new processor for crypto miners, known as the CMP, is also likely to be a favorable factor. Therefore, the company is expected to have grabbed a huge market share, the impact of which should be reflected in the to-be-reported quarter’s performance.

NVIDIA’s Professional Visualization and Automotive units recorded sequential growth last quarter, reflecting improved trends. Professional Visualization revenues surged 30% on a rise in demand for desktop workstations as consumers resumed their office posts and organizations recommenced purchases which had been postponed due to the pandemic.

Additionally, revenues at the Automotive segment jumped 16% sequentially during the last quarter of Fiscal 2021, driven by continued recovery in the global automotive production volumes and elevated sales of AI cockpit solutions.

The continuation of such trends is likely to have benefitted the first quarter of Fiscal 2022 as well.

Nevertheless, government-imposed lockdown and social-distancing measures to restrain the spread of coronavirus have disrupted retail channel sales. Therefore, this might have offset the gain from the strong demand for work-and-learn-from-home hardware infrastructure to some extent.

Management Comments

Last month, CFO Colette Kress said, “Within Data Center we have good visibility, and we expect another strong year. Industries are increasingly using AI to improve their products and services. We expect this will lead to increased consumption of our platform through cloud service providers, resulting in more purchases as we go through the year. Our EGX platform has strong momentum, and we expect this will drive increased revenue from enterprise and edge computing deployments in the second half of the year.”

“Overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean. We expect demand to continue to exceed supply for much of this year. We believe we will have sufficient supply to support sequential growth beyond Q1,” she added.

NVIDIA also lifted the first-quarter revenue estimate for its new CMP product for industrial-scale cryptocurrency mining to $150 million, up from the prior estimate of $50 million.

Recent Developments

Last week, NVIDIA announced a four-for-one split of its common stock in the form of a stock dividend. The plan awaits shareholders’ approval, as the split will increase the number of authorized shares to 4 billion.

On consummation of the approval, which is expected on June 3 at the company’s 2021 Annual Meeting of Stockholders, each shareholder is entitled to receive the dividend for three additional shares of common stock for every share held as of June 21, 2021. The dividend is likely to be paid on July 19, while the stock split-adjusted basis trading will begin the next day.

Recently, NVIDIA revealed a new wave of GeForce RTX laptops, which are delivering real-time ray tracing and AI-based DLSS to a huge number of gamers and creators.

The platforms, which are based on the new GeForce RTX 3050 Ti and 3050 Laptop GPUs, bring NVIDIA’s Ampere architecture with dedicated RT and Tensor Cores to the most mainstream audience yet, and expand the number of RTX 30 Series laptops to more than 140, the company said.

Analyst Recommendations

Recently, Susquehanna analyst Christopher Rolland reiterated a Buy rating and a price target of $700 (11.8% upside potential) on the stock.

Rolland said, “From a high level, we expect another beat-and-raise as continued stay-at-home dynamics, Ampere gaming ramp, and crypto-mining drove GPU demand to all-time highs. Having said that, we expect the pace of demand to slow moving beyond the April quarter (estimated up +75% YOY), as reopenings continue across the US and physical activities resume.”

On May 25, Needham analyst Rajvindra Gill assigned a Buy rating and a price target of $800 (27.8% upside potential) on the stock.

For Q1, Gill expects “a strong quarter and guide driven by unprecedented demand for GeForce 3000 series (Ampere) and rapid adoption of RDX/ray-tracing enabled cards, and continued upside from CMP and data center inference and training sales.”

“Demand has continued to be robust across the board and with NVIDIA products in short supply, there remains a possibility of upside to these numbers on even firmer pricing,” the analyst added.

Consensus among analysts is a Strong Buy based on 16 Buys versus 1 Hold. The average analyst price target stands at $705 and implies upside potential of 12.6% to current levels.

Bloggers Weigh In

Furthermore, TipRanks data shows that financial blogger opinions are 92% Bullish on NVDA, compared to a sector average of 69%.

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