Nvidia (NVDA) is scheduled to report results of its fourth fiscal quarter after the market close on Wednesday, February 24, 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 fourth quarter revenue $4.8B, plus or minus 2%, with consensus at $4.42B. The company also said it sees fourth quarter non-GAAP gross margins 65.5%, plus or minus 50 basis points, and fourth quarter non-GAAP tax rate 8%, plus or minus 1%. Additionally, Nvidia said it was excited about combined company opportunity with Arm Limited acquisition, and that it expects revenue decline for Mellanox in the fourth quarter. Despite seasonally down quarter, the company expects gaming to be up sequentially in the fourth quarter. Data center should be down slightly in the fourth quarter, while continued growth in automotive and professional visualization is expected.
2. TARGETS UPPED AHEAD OF RESULTS: On Monday, BMO Capital analyst Ambrish Srivastava raised the firm's price target on Nvidia to $680 from $650, while keeping an Outperform rating on the shares ahead of the company's quarterly results. The analyst noted that the fundamental backdrop for Nvidia is "particularly strong," and while his estimates for the fourth quarter are in line with consensus, he sees first quarter estimates by the Street as being "low." Srivastava added that the company's gaming business is particularly strong, with crypto mining adding to the demand. He also sees Nvidia being "more proactive" than the last time in addressing the crypto surge.
Deutsche Bank analyst Ross Seymore also raised his price target on Nvidia to $550 from $515 and kept a Hold rating on the shares ahead of the company's fourth quarter results on Wednesday. The analyst expects Nvidia to deliver a "solid" quarter and guidance, albeit with supply shortages likely muting the upside potential as well as the downside risks from seasonality in the first quarter.
3. NIO PARTNERS WITH NVIDIA: Last month, NIO (NIO) and Nvidia announced that the automaker has selected the NVIDIA DRIVE Orin system-on-a-chip for its new generation of electric vehicles, which will offer advanced automated driving capabilities. At NIO Day, the company's annual customer event, the EV maker revealed its NVIDIA DRIVE Orin-powered supercomputer, dubbed Adam, which will first appear in the ET7 sedan that will ship in China starting in 2022. As the first of NIO's EVs to feature Orin, the flagship ET7 is a high-performance vehicle that accelerates from zero to 100km in only 3.9 seconds. It also features a new 150kw battery for extended mileage range.
4. ARM DEAL: Alphabet's (GOOG, GOOGL) Google, Microsoft (MSFT), and Qualcomm (QCOM) are among the companies raising concerns about Nvidia's pending acquisition of ARM to antitrust officials, David McLaughlin, Ian King and Dina Bass of Bloomberg reported earlier this month, citing people familiar with the process. At least one of the companies wants the deal killed, the reporters noted. The deal is under review by the Federal Trade Commission, which has opened an in-depth investigation of the merger and has sent information demands to third parties, a source told Bloomberg. An Nvidia spokesperson told Bloomberg in a statement that, "As we proceed through the review process, we're confident that both regulators and customers will see the benefits of our plan to continue Arm's open licensing model and ensure a transparent, collaborative relationship with Arm's licensees. Our vision for Arm will help all Arm licensees grow their businesses and expand into new markets."
5. PROFESSIONAL MINING: In a blog post on Thursday, Nvidia said in part that, "To address the specific needs of Ethereum mining, we're announcing the NVIDIA CMP, or, Cryptocurrency Mining Processor, product line for professional mining. CMP products - which don't do graphics - are sold through authorized partners and optimized for the best mining performance and efficiency. They don't meet the specifications required of a GeForce GPU and, thus, don't impact the availability of GeForce GPUs to gamers."
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