Why Nvidia Should Be In Your Portfolio Ahead Of Earnings

Photo Credit: Maurizio Pesce

NVIDIA Corporation (NVDA) Information Technology - Semiconductors | Reports May 12, After Market Closes

Key Takeaways

• The Estimize community is calling for earnings per share of 34 cents on $1.29 billion in revenue, 2 cents higher than Wall Street on the bottom line and $19 on the top
• The company is expanding out of traditional PC gaming into data centers, automotives and visualization
• Gaming still accounts for a majority of Nvidia’s revenue while automobiles are its fastest growing division.
• What are you expecting for NVDA? Get your estimate in here!

Chipmaker, Nvidia is scheduled to report first quarter earnings tomorrow, after the market closes. The company is best known for its graphics cards found in PCs, but is also emerging as a major player in gaming, professional visualization, data center and automotive offerings. The combined four segments increased 26% last year and are expected to be a source of future growth. Nvidia’s deeper penetration in these rapidly growing markets has provided a major boost to earnings. The past 3 quarters featured large beats on both the top and bottom line, and tomorrow should be no different.

The Estimize community is calling for earnings per share of 35 cents on $1.29 billion in revenue, 2 cents higher than Wall Street on the bottom line and $19 million on the top. Compared to a year earlier this represents a 5% increase in earnings while sales are expected to rise 11%. Given Nvidia’s history of beating, it’s not surprising that the stock is a positive mover leading up and through earnings season. Currently, shares are up nearly 75% in the past 12 months. 

Despite the continued slowdown in the PC market and a new focus on higher growth sectors, Nvidia’s bread and butter remains graphics cards or GPUs. The company is currently leaps and bounds ahead of its only competition, AMD, controlling almost 75% of the GPU market. This year Nvidia is set to release its newest graphics card which will be more powerful and cheaper. High end graphics cards provide Nvidia their highest margins, supported by demand from hardcore gamers.

Over the years Nvidia has managed to lower its dependence on PCs and increase its exposure to high growth industries. Gaming, which largely coincides with its traditional business, has been a major focus. Increasing adoption of its GeForce processors, growing anticipation of VR devices and the success of its gaming tablet will continue to drive growth. Apart from gaming, Nvidia is establishing itself in automotive and data centers industries. As we move closer to self driving cars, Nvidia has pioneered some of the systems that will run these vehicles. On the data side, the newest versions of VMware’s virtualization suite will be supported by Nvidia processors.

Nonetheless, the continuous decline in PC sales is a cause for concern and increasing competition from Intel (INTC), Qualcomm (QCOM) and even AMD remain a threat.