Nvidia (NVDA) is scheduled to report results of its first fiscal quarter after the market close on May 16, with a conference call scheduled for 5:30 pm ET. What to watch for:
1. OUTLOOK: During the company's last earnings call, Nvidia said it sees first quarter revenue of $2.2B, plus or minus 2%, and GAAP and non-GAAP gross margins of 58.8% and 59.0%, respectively, plus or minus 50 basis points. The company also said it expects first quarter GAAP and non-GAAP operating expenses of approximately $930M and $755M, respectively, and GAAP and non-GAAP other income and expense of approximately $20M. GAAP and non-GAAP tax rates are both expected to be 10%, plus or minus 1%, excluding any discrete items. Additionally, Nvidia announced fiscal year 2020 revenue flat to down slightly, with consensus at $10.91B.
2. EARNINGS 'LIKELY A NEGATIVE CATALYST': Last week, Lynx Equity Strategies analysts Jahanara Nissar and KC Rajkumar said they believe the upcoming earnings call for Nvidia will be a negative catalyst for the stock. Investors will be looking for an update on 2020 guidance, but the analysts do not expect Nvidia to raise guidance, beyond possibly "sounding slightly more bullish" on mainstream gaming. Nissar and Rajkumar also see near-term downside in the stock if management does not raise 2020 expectations and downside to 2021 consensus earnings per share estimates. Noting that he is "incrementally more cautious" on the July quarter guidance due to PC shortages and "cloud digestion," Deutsche Bank analyst Ross Seymore told investors he expects Nvidia to report in-line April quarter results. The analyst also sees Nvidia maintaining its full year revenue guidance, while highlighting caution for the second quarter.
3. MELLANOX ACQUISITION: Back in March, Nvidia and Mellanox (MLNX) announced that the companies have reached a definitive agreement under which the former will acquire the latter. Pursuant to the agreement, Nvidia will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash, representing a total enterprise value of approximately $6.9B. Once complete, the combination is expected to be immediately accretive to NVIDIA's non-GAAP gross margin, non-GAAP earnings per share and free cash flow. The transaction is expected to close by the end of calendar year 2019.
4. NVIDIA GEFORCE GPUS, AMAZON PARTNERSHIP: Also in March, Nvidia announced several developments that "reinforce NVIDIA GeForce GPUs as the core platform that allows game developers to add real-time ray tracing effects to games." The announcements, which build on the central role Microsoft (MSFT) DirectX Ray Tracing plays in the PC gaming ecosystem, include integration of real-time ray tracing into Unreal Engine and Unity, addition of ray tracing support to GeForce GTX GPUs, introduction of NVIDIA GameWorks RTX, and new games and experiences that showcase real-time ray tracing such as Dragonhound, Quake II RTX and others. The company also said that it is collaborating with Amazon (AMZN) Web Services Internet of Things on NVIDIA Jetson to enable customers to deploy AI and deep learning to millions of connected devices.
Keywords: earnings watch, earnings, results, quarterly results, guidance, geforce