Nvidia (NVDA) 3rd Quarter Earnings: What to Expect

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Graphic chip powerhouse Nvidia (NVDA) is set to report third quarter fiscal 2018 earnings results after Thursday’s closing bell.

With its shares under pressure, down some 25% in thirty days, Nvidia must go above and beyond to reverse the slide, particularly in an environment where chip stocks have fallen out of favor on Wall Street as evidenced by the 5% year-to-date slide in the Philadelphia Semiconductor Index. Last week, while citing concerns about the market for graphics cards used in video games, Morgan Stanley lowered its price target on Nvidia stock.

As it stands, amid last month’s tech selloff, Nvidia shares remain some 30% below their Oct. 1st high of $292.06. But thanks to successes in high-growth markets like artificial intelligence, autonomous vehicles and cryptocurrency mining, where Nvidia chips dominate, the company has multiple growth levers which it can pull to get its shares heading back in the right direction. Combined with its strong exposure to the Datacenter, where it competes with the likes of Intel (INTC) and Advanced Micro Devices (AMD), Nvidia is poised to log its thirteenth straight earnings and revenue beat.

For the three months that ended September, Wall Street expects the Santa Clara, Calif.-based company to earn $1.71 per share on revenue of $3.24 billion. This compares to the year-ago quarter when earnings came to $1.33 per share on revenue of $2.64 billion. For the full year, ending in December, earnings of $7.30 per share would rise 53% year over year, while full-year revenue of $12.95 billion would rise 33.4% year over year.

On a quarterly and full-year basis, both sets of projections are impressive. There has been concerns that softening demand for GPUs (graphic processor units) and the excess inventory could lead to a revenue Nvidia miss and possibly downbeat Q4 guidance, or possibly both. I’m of the belief that the risk is currently priced into the stock. What will drive the shares higher, however, is how the company performs in individual growth segments, particularly in the Datacenter segment, where projections for the quarter look impressive.

Consensus estimates calls for revenue growth of around 65%, reaching $825 million. This compares to the second quarter where growth surged 83% to $720 million. The company’s Automotive segment revenue will also be closely-watched. Revenue is projected to rise 12% year over year to $162 million. Elsewhere, there’s the Nvidia’s gaming unit where revenue growth is projected to jump about 20% to $1.88 billion.

Last but not least will be the guidance, which was blamed in the second quarter for the sending the shares downward. Wall Street is modeling for fourth quarter revenue to reach $3.4 billion, which would mark year-over-year growth of around 17%. Assuming Nvidia is confident enough to meet that level, or — as it has known to do — surpass it, NVDA stock could be one of the better bargains heading into 2019. But it must first take care of business Thursday.

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

Referenced Symbols: NVDA

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