Nvidia (NVDA) is scheduled to report results of its second fiscal quarter after the market close on August 15, 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 second quarter revenue of $2.55B, plus or minus 2%, and GAAP and non-GAAP gross margins of 59.2% and 59.5%, respectively, plus or minus 50 basis points. The company also said it expects second quarter GAAP and non-GAAP operating expenses to be approximately $985M and $765M, respectively, GAAP and non-GAAP other income and expense of approximately $27M, and GAAP and non-GAAP tax rates of 10%, plus or minus 1%, excluding any discrete items.
2. EXPECTATIONS NEED 'ONE LAST RESET': In a research note ahead of quarterly results, Citi analyst Atif Malik reiterated a Buy rating on shares of Nvidia. The analyst argued that Street expectations for the second half of 2019 "need one last reset" before the stock can work sustainably. The analyst models for year-over-year growth to resume in Nvidia's January quarter, and views 2019 as a "reset year" on cryptocurrency, China, and first half data center weakness. Malik expects "strong" 20% revenue growth to resume in 2020 for Nvidia.
3. GAMING SALES NORMALIZING: After hosting an investor meeting at Nvidia's headquarters, Nomura Instinet analyst David Wong said the gaming GPU market is coming out of two quarters of an inventory correction and the company expects gaming segment revenues to get back to "normalized" levels of about $1.4B in either the July or October quarter. The analyst thinks Nvidia likely has good visibility into channel inventory and as such, he considers it positive that the company now thinks that channel inventory is at appropriate levels. However, with the ongoing issues related to international trade, there is "substantial uncertainty" as to demand trends in the various electronic end markets, including the gaming end market, over the next few months, Wong contended.
4. DATA CENTER: In a research note earlier this week, Wells Fargo analyst Aaron Rakers told investors he believes that for shares of Nvidia to move materially higher it needs to instill confidence in a return to growth in Data Center through the second half of 2020. The analyst expects Nvidia to reiterate/emphasize traction it is seeing in AI Inferencing, an incremental growth driver, which will also likely leave investors to think about the growth trends in Nvidia core AI Training part of the market.
5. PARTNERSHIPS: Back in June, Nvidia and Activision (ATVI) announced that the former is the official PC partner for Call of Duty: Modern Warfare, scheduled for release on October 25. Nvidia is working side by side with developer Infinity Ward to bring real-time DirectX Raytracing and Nvidia Adaptive Shading gaming technologies to the PC version of the new Modern Warfare.
Meanwhile, the Volvo Group (VOLVY) signed an agreement with Nvidia to jointly develop the decision-making system of autonomous commercial vehicles and machines. The partnership with Nvidia will focus on the development of a flexible, scalable Autonomous Driving System, which is planned to be used first in commercial pilots and later in commercial offerings from the Volvo Group.