Nvidia: Earnings Preview
The stock has gained 190% in the last 12 months against the industry gain of 46%.
Shahid is a business graduate, with a knack for writing on business and finance topics.
2020-08-18 09:41

Nvidia (NASDAQ: NVDA), a manufacturer of graphics chips, will announce its second-quarter earnings report on August 19, 2020. Nvidia's stock started the year 2020 with $239.91 per share and has been having a stellar run since then, gaining around 93% YTD to close at 462.56 on August 14, 2020. The stock has gained 190% in the last 12 months against the industry gain of 46%.

EPS and Revenue Estimates

Analysts at the Wallstreet expect higher revenue of $3.65 billion, with an increase of 41.7% from Q2 2019. Moreover, the analysts estimate earnings per share of $1.93, registering a growth of 55.7% as compared to the same quarter last year. Nvidia posted an earnings surprise of 6.51% in the first quarter when it delivered first-quarter EPS of $1.8 against the analysts' forecast of $1.69.

Earnings by Segments

The company topped, for the first time, $1 billion data-center sales at the start of the year 2020. Nvidia will register sales of its new data-center product — the A100 graphics-processing unit, which was launched in May 2020 — in its second-quarter results. The new chip will replace Nvidia’s old chips, Turing and Volta, and will present a single solution for cloud-based service providers. The company has already supplied its new data-center chips, called Ampere, to large cloud-computing providers, such as Amazon, Microsoft, Azure, and Google.

So far, the gaming segment has been the leading revenue-generator for Nvidia, with the data-center segment lagging. But with the data-center sales crossing $1 billion in Q1 2020, the data-center segment, analysts believe, will surpass the gaming-segment sales. The analysts have forecasted gaming sales of $1.4 billion compared with the data-center sales of $1.72 billion. In July, Nvidia also beat Intel as the largest chip-manufacturing company by market capitalization.

Financial Ratios and Metrics

Nvidia boasts a 25% return on equity (trailing 12 months), which is way higher than the industry average of 11%. This shows that the company has been efficiently using the shareholders' equity to generate returns for its shareholders. The 25% ROE implies that for every $1 invested by the shareholders, the company is generating $0.25 as a return. Moreover, on average, the company has been able to register a 30% growth in its net income over the past five years, compared with the industry average of 18% during the same period. The company has a price-to-earnings ratio of 85 (trailing 12 months data) as compared to the industry average of 37. The company has a PEG (Price/ earnings to growth) ratio of 5.

Most of the analysts at the Wallstreet are upbeat about the stock and have set a target price for the stock at about $500.

Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Published On
2020-08-18 09:41

About the Author
Shahid is a business graduate, with a knack for writing on business and finance topics.

Analyst Ratings
Target Price $226.4
# of Analysts 41
Last updated 2021-09-17

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