) is scheduled to announce its second quarter 2013 results on
August 9, 2012. In the run up to the earnings release we noticed
some movement in analysts' estimates.
First Quarter Overview
The company reported total revenue of $924.9 million in the
quarter, down 3.9% from $962.0 million in the year-ago quarter.
Graphic Processing Unit
saw revenue declining 6.7% sequentially as a result of 28 nm supply
shortage, which also impacted the high-end desktop business. The
business dropped 4.2% sequentially, while
business jumped 20.8% backed by the company's Tegra business.
Gross margin on a GAAP basis was 50.1%, versus 51.4% in the
previous quarter. Gross margin was at the top end of management's
guidance. Although the gross margin declined slightly, the company
reported margin expansion in the Kepler GPUs for desktops and
notebooks. On a non-GAAP basis, gross margin was 50.4%, which
declined from 52.5% reported in the previous quarter.
Second Quarter Outlook
For the second quarter of fiscal 2013, revenue is expected to be
in the range of $990.0 million to $1.05 billion, whereas gross
margin is projected to be 51.2% (plus or minus 1 percentage point).
Operating expense is expected to be $418 million.
The company also expects depreciation and amortization in the
range of $55.0 million to $57.0 million and capital expenditures in
the range of $35.0 million to $45.0 million. Diluted shares are
expected to be roughly 628 million.
Agreement of Analysts
A look at estimate revisions in the last 30 days shows negative
sentiments. Out of the 29 analysts providing estimates for the
second quarter, 5 analysts revised their estimates downward over
the last 30 days, while 3 moved in the opposite direction.
For fiscal 2013, 8 out of 29 analysts lowered their estimates,
while only one moved in the opposite direction. For fiscal 2014,
only 1 out of 29 analysts raised the estimate, while 8 analysts
lowered their estimates downward over the last 30 days.
Some analysts believe that NVIDIA's Tegra chips for smartphones
and tablets are well positioned versus
) and others. However, a negative with respect to these
fast-growing markets is that the largest vendors, Samsung and
) make their own processors.
Analysts are also of the opinion that Tegra can ship units worth
$500 million in 2012 as smartphone, non-Apple tablets and other
volumes increase. This apart, the hype surrounding a Tegra-related
platform has come down to a considerable extent.
Moreover, analysts are also of the opinion that NVIDIA faces
long-term GPU attach rate risks as tech behemoths like
Advanced Micro Devices
) pursue integrated architectures. Again, other analysts are also
of the opinion that NVIDIA could be a major PC processor supplier
if WoA is successful. Further, with growth in handheld devices,
enterprise opportunities are expected to increase rapidly.
Magnitude of Estimate Revisions
The Zacks Consensus Estimates for the July and October quarters
have not changed in the last 30 days. However, the Zacks Consensus
Estimate for both fiscal years 2013 and 2014 dropped a couple of
The Zacks Consensus Estimate for the second quarter increased by
a penny to 15 cents in the past 90 days. For Fiscal 2013, it moved
up by 3 cents. The Zacks Consensus Estimate for fiscal 2014 is also
up 2 cents in the past 90 days to 93 cents.
The company delivered weak first quarter results. The expected
decline in PC demand may affect the demand for NVIDIA's graphics
cards. However, growth trends in the smartphone and tablet markets
are encouraging, since NVIDIA's Tegra chips could see some
Moreover, the acquisition of data chip manufacturer Icera will
add value to its product portfolio. The newly introduced NVIDIA
PhysX technology will likely attract more gaming customers.
However, NVIDIA's performance may be tempered slightly by the weak
gaming market, economic slowdown in Europe and increased
Currently, NVIDIA holds a Zacks #3 Rank, implying a short-term
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