Nvidia (NVDA) is scheduled to report results of its third fiscal quarter after the market close on Wednesday, November 18, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. OUTLOOK: During the company's last earnings call, Nvidia said it sees third quarter revenue of $4.4B, plus or minus 2%, and third quarter adjusted gross margins of 65.5%, plus or minus 50 basis points. The company also said it expects gaming to be up 25% in the third quarter and expects operating expenses of $1.54B for the quarter.
2. 'STRONG' QUARTERLY RESULTS EXPECTED: Truist analyst William Stein kept his Buy rating and $623 price target on Nvidia ahead of its earnings, saying the company should post a "strong" set of third quarter results and fourth quarter outlook, and also offer "strengthening" forecast for 2021 on the company's datacenter business. Stein added that the recent public and proprietary data points suggest "upward pressure" to Nvidia's earnings estimates for near, medium- and long-term, with the company retaining its leadership position in parallel compute for server acceleration and AI applications.
3. ARM ACQUISITION: Back in September, Nvidia and SoftBank (SFTBY) announced a definitive agreement under which Nvidia will acquire Arm Limited from SoftBank and the SoftBank Vision Fund in a transaction valued at $40B. The transaction is expected to be immediately accretive to Nvidia's non-GAAP gross margin and non-GAAP earnings per share. SoftBank will remain committed to Arm's long-term success through its ownership stake in Nvidia, expected to be under 10%, the companies said. Under the terms of the transaction, which has been approved by the boards of directors of Nvidia, SoftBank and Arm, Nvidia will pay to SoftBank a total of $21.5B in Nvidia common stock and $12B in cash, which includes $2B payable at signing. The number of Nvidia shares to be issued at closing is 44.3M, determined using the average closing price of Nvidia common stock for the last 30 trading days.
Additionally, SoftBank may receive up to $5B in cash or common stock under an earn-out construct, subject to satisfaction of specific financial performance targets by Arm. Nvidia will also issue $1.5B in equity to Arm employees. Nvidia intends to finance the cash portion of the transaction with balance sheet cash. The transaction does not include Arm's IoT Services Group.
4. PARTNERSHIPS: On September 22, Li Auto (LI) announced a three-way strategic cooperation with Nvidia and Nvidia's Chinese partner, Huizhou Desay SV. Through this strategic cooperation, Li Auto will be the first OEM equipping its vehicles, the full-size extended-range premium smart SUV to be launched in 2022, with the Nvidia Orin SoC chipset. The Nvidia Orin SoC was released in 2019 and is scheduled to be in production in 2022. Orin uses a 7-nanometer production process to achieve a computing power of 200 TOPS, seven times that of the previous generation, the Xavier SoC. Even with the improvement in computing performance, Orin's baseline power consumption is 45 watts.
Earlier this month, Nvidia and Hyundai Motor (HYMTF) announced that the automaker's entire lineup of Hyundai, Kia and Genesis models will come standard with NVIDIA DRIVE in-vehicle infotainment systems starting in 2022.
Nvidia
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SoftBank Group
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Li Auto
+0.92 (+2.63%)
Hyundai Motor
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