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Nvidia Corporation Q1 Earnings Preview: What To Watch?

 May 09, 2013 09:25 AM

(By Mani) Nvidia Corporation (NASDAQ: NVDA) is scheduled to report its first quarter financial results on May 9. The graphics chip maker will host a conference call on May 9, at 2 p.m. PT (5 p.m. ET) to discuss the results.

Wall Street, according to analysts polled by Thomson Reuters, expect earnings of 10 cents a share flat with last year. In the past three quarters, the company's earnings have topped Street view, with upside surprises of 16.7 percent, 10 percent and 35.7 percent, respectively.

Over the past three months, the consensus estimate has declined from 21 cents a share. Two analysts have upped their earnings target in the last 30 days.

[Related -NVIDIA Corporation (NVDA) Q3 Earnings Preview: Can We See Another Beat?]

Quarterly revenues are expected to rise 1.7 percent to $940.54 million from $924.88 million in the same quarter last year. In the past two quarters, the Nvidia has recorded double-digit increase in revenue. Nvidia expects first quarter revenue to be $940 million, plus or minus two percent.

Nvidia has two key segments - Graphics Processing Unit (GPU) business and Tegra. The GPU business includes GeForce graphics chips and cards for PCs, Tesla graphics for super-computing applications, Quadro for computer-aided design or medical imaging). GPU accounts for more than 70 percent of sales.

The second is the Tegra line of mobile system-on-a-chip (SoC) processors. Tegra integrates a CPU, GPU, and memory controller onto a single chip that powers smartphones and tablets. It would also be used in Nvidia's upcoming Project Shield hand-held gaming device. Last year, Tegra accounted for 18 percent of total revenues.

[Related -Nvidia Corporation: Ramping Tegra 4 In 2H May Compress Current Gross Margins]

Investors would be keeping a close eye on GPU unit performance amid declining PC sales as the segment primarily caters to PCs. The GPU unit's revenue grew only 2 percent in 2012 and, in fact, over the past 3 years sales fell 3 percent.

On the positive side, Tesla chips gained traction in the supercomputing space, and the market would welcome any positive momentum in Tesla sales.

Another focus point would be Tegra, which is considered as the next leg of growth for Nvidia. Wall Street would be watching for customer signings on the smartphone front as it faces cut throat competition from market leader Qualcomm, Inc. (NASDAQ:QCOM), which is speculated to have captured the next-generation Nexus 7 processor business from Nvidia.

Meanwhile, Nvidia recently announced sample availability of its Tegra 4i processor, which is the first fully integrated 4G LTE mobile processor, and it could be a potential threat to Qualcomm, Inc. if it is cost and performance is competitive.

So, investors would watch for the production plans and traction of Tegra 4i and any comments over the Nexus 7 rumors.

In addition, the Street would be looking for updates on Project Shield, a unique Android gaming device that is expected to ship in the second quarter of fiscal 2014.

Moreover, the outlook for the second quarter revenue would be closely monitored, and it may decide the movement of the stock depending upon how it fares with the Street view of 14 cent earnings and $1.01 billion revenue.

For the fourth quarter, the Santa Clara, California-based company reported net income of $174.0 million or 28 cents a share, compared to $116.0 million or 19 cents a share for the year-ago quarter. Excluding items, it earned 35 cents a share. Revenue for the fourth quarter rose 16 percent to $1.12 billion.

Out of 32 analysts covering the stock, nine analysts have a rating of "strong buy" or "buy," while 21 analysts recommend "hold." Two analysts have a " sell" rating on the stock, which traded between $11.15 and $15.22 during the past 52-weeks.



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