Nvidia (NVDA) is scheduled to report results of its third fiscal quarter after the market close on November 15, with a conference call scheduled for 5:30 pm ET. What to watch for:
1. GUIDANCE LIKELY TO MISS SAYS SUSQUEHANNA IN UPGRADE: Ahead of quarterly results, Susquehanna analyst Christopher Rolland upgraded Nvidia to Positive from Neutral this morning, but lowered his price target on the shares to $230 from $250. While the analyst thinks the odds of a guidance miss are “high,” he argued that implied valuation discounts an “excessively severe downside scenario” and the company’s near-term issues should pass in a quarter. Rolland acknowledged that the RTX cycle appears “ho-hum,” but pointed out that he is compelled by new 7nm GPUs next fall, a pro-viz cycle, and the growing Artificial Intelligence inference opportunity. The analyst also argued that substantial channel inventory is a result of the crypto-GPU hangover, but secondarily the potential pull-in of GPU builds in front of September’s 10% tariff and perhaps January’s 25% potential tariff. As evidenced by retail graphics card prices that have fallen from an 89% mark-up to MSRP in April to just 19%-plus at the end of October, Rolland believes the channel is near clearing. Nonetheless, the analyst highlighted that he is “not making a call on a bottom for the broad-based semiconductor cycle” as he has been very vocal about expanding lead-times and likely inventory builds that may take some time to work down. Last month, his peer at JPMorgan also upgraded the stock to Overweight from Neutral. While analyst Harlan Sur lowered his estimates to reflect a near-term gaming GPU slowdown, he argued that Nvidia's HPC/professional visualization/datacenter momentum "remains strong" as new compute workload acceleration penetration "remains solid." Nvidia has delivered strong growth across Gaming and Datacenter/HPC over the past few years, Sur contended, calling it "the leader across secular growth markets of Gaming, Datacenter and Autonomous Driving."
2. OUTLOOK: During the company’s last earnings call, Nvidia said it sees third quarter revenue of $3.25B, plus/minus 2%, with consensus at $3.34B. The company also said it expects GAAP and non-GAAP gross margins to be 62.6% and 62.8%, respectively, plus or minus 50 basis points. Additionally, Nvidia said it sees no contributions from cryptocurrency “going forward.” “Our [previous] revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100M, while actual crypto-specific product revenue was $18M. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”
3. NEW GAMING GPUs: During a presentation at the Gamescom conference in Germany in August, Nvidia's CEO Jensen Huang unveiled the new GeForce RTX 2070/80 and the new GeForce RTX 2080 Ti. In a research note after the announcement, JPMorgan's Harlan Sur argued that the new GPUs should "solidify" the company's leadership position in gaming and drive a "strong upgrade cycle." Voicing a similar opinion, his peer at Bank of America Merrill Lynch told investors he sees the Turing gamecard launch potentially re-energizing growth.
Nvidia
+10.32 (+5.45%)