Semiconductor giant Nvidia (NVDA) is set to report second quarter fiscal 2018 earnings results after Thursday’s closing bell.
For the three months that ended June, Wall Street expects the Santa Clara, Calif.-based company to earn $1.66 per share on revenue of $3.11 billion. This compares to the year-ago quarter when earnings came to 92 cents per share on revenue of $2.23 billion. For the full year, ending in December, earnings of $7.24 per share would rise 50% year over year, while full-year revenue of $13.09 billion would rise 34.8% year over year.
Shares of the graphic chip powerhouse has risen some 34% year to date and 55% over the past year, crushing the 6.7% year-to-date returns of Philadelphia Semiconductor Index (SOX). Earlier this week, Wells Fargo analysts Aaron Raker upgraded Nvidia shares with an Outperform rating, while upping his price target to $315, suggesting additional premiums of 21.5% from Wednesday’s close of $259.08.
It would seem fears once related to weak cryptocurrency mining for Nvidia has vanished, while the Street has begun to see Nvidia’s datacenter growth potential as an undervalued component to this story. Ahead of Thursday’s results, Goldman Sachs analyst Toshiya Hari, citing datacenter revenue and strong gross margins from Nvidia, sees an additional 26% return on the horizon.
"Nvidia, in our view, is one of the few companies in our semiconductor coverage with exposure to multiple secularly growing end-markets (i.e. PC Gaming, Datacenter, ADAS/AV), a deep and sustainable competitive moat, and as a result, a margin/return profile that significantly exceeds its peers," wrote Hari.
To the extent Hari’s prospects comes to fruition, along with Nvidia’s capabilities in the areas of artificial intelligence and cryptocurrency mining, Nvidia stock could finally reach $300 in the weeks following the report, if not sooner. Despite operating within consistently high expectations over the past couple of years — not to mention increased competition from the likes of Intel (INTC) and Advanced Micro Devices (AMD) — Nvidia has delivered ten consecutive beat-and-raise quarters.
In the first quarter, Nvidia delivered record earnings per share of $1.98, which crushed even the most bullish analyst estimate, while soaring 151% year over year. Meanwhile, first quarter revenue reached yet another record, coming in at reached $3.21 billion, marking an increase of 66% year over year and 10% from the fourth quarter. These gains were largely driven by a 71% year-over-year surge in the Datacenter segment, to go along with an almost 68% rise in Gaming revenue.
On Thursday Wall Street expect more of the same, particularly for the gaming business, which accounts for more than 50% of total revenue. Combined with its capabilities in the datacenter market, which research firm technavio.com forecasts to grow to $32.3 billion in the next two years, translating to a compound annual growth rate of 11%, Nvidia has tons of runway for more market share gains.
All told, given these various growth levers for Nvidia, now seems like an ideal time to own Nvidia stock, which, following the report, has a strong shot at exceeding its all-time high of $269.