Nvidia (NVDA) 1st Quarter Earnings: What to Expect

Nvidia (NVDA) is set to report first quarter fiscal 2019 earnings results after Thursday’s closing bell. The only question weighing on the minds of investors will be its guidance, given the downbeat results and weak guidance recently received from rival Intel (INTC).

Shares of the graphic chip powerhouse, which has delivered eleven consecutive beat-and-raise quarters, have been punished during the recent tech selloff, falling 12% over the past thirty days, while plunging 33% in twelve months. Investors have grown concerned about the market for graphics cards used in video games, which has become more magnified amid the trade war with China. During its conference call, Intel warned that "data-center inventory and capacity digestion" had been worse than the company expected.

Analysts have trimmed expectations from the entire sector, which has hit Nvidia hard. But is this an overreaction? There are reasons to suggest too much pessimism surrounds the underlying business, which can still reward investors in 2019, particularly given the company’s exposure to multiple growth markets such as autonomous driving and artificial intelligence, among others. Nvidia stock could be poised for a rebound. On Thursday the company’s guidance could be a catalyst to revive not only NVDA stock, but also the entire chip sector.

For the three months that ended March, Wall Street expects the Santa Clara, Calif.-based company to earn 79 cents per share on revenue of $2.2 billion. This compares to the year-ago quarter when earnings came to $2.05 per share on revenue of $3.21 billion. For the full year, ending in December, earnings of $5.30 per share would decline 20% year over year, while full-year revenue of $11.13 billion would decline 5% year over year.

Despite the feared weakness in Datacenter, the company is not giving up on what is still projected to be a strong growth area in the quarters and years ahead. Earlier in March, Nvidia announced an acquisition for Mellanox Technologies (MLNX), spending $6.9 billion and further cementing itself in the Datacenter.

“The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling demand on the world’s datacenters,” said Nvidia CEO Jensen Huang.

Nvidia believes it now has the capabilities to address the demand. For the quarter, analysts are looking for Nvidia to deliver Datacenter revenue of $665.1 million, which would be down about 5% from the year-ago quarter. Breaking out the rest of the segments: First quarter gaming revenue is expected to reach $937.2 million, which would decline 46%, while professional visualization revenue is seen rising more than 15% to $289.9 million. Last but not least, revenue in the Auto segment is expected to rise 13% to $163.8 million.

All told, these aren’t the same breathtaking numbers Nvidia has put up over the past couple of years when its stock was outpacing the market, but investors who have waited for a better entry point should consider this a solid opportunity. The company on Thursday will look to re-establish itself as the graphic chip powerhouse for which it has become known.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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