RBC Capital Markets published a research report previewing NVIDIA Corporation (NASDAQ:NVDA)’s upcoming 2Q earnings report. RBC analysts Doug Freedman, Earl Hege and Jeriel Ong summarize their view of Nvidia’s second quarter in the overview of their report: “We see risk to JulQ results but still view street and RBC expectations as reasonable and achievable. We are not adjusting estimates down to account for risk to JulQ number.”

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NVIDIA Corporation (NASDAQ:NVDA) reports its second quarter earnings after the close of trading on Thursday, August 7th.

Risks with NVIDIA 2Q report

Freedman et al.admit there is “some risk to NVDA revs/EPS given some loss at high-end GPUs.” The RBC analysts also highligh that although crypto-currency mining is still mainly an AMD-GPU driven business today, “the mix may shift a little towards NVDA in the future.”

They also point to a strong, but lagging correlation between moves up in crypto-currency pricing and high-end GPU sales. The RBC analysts say that despite signs of weakness in high-end GPUs, they believe gaming could give a notable boost to GPU sales.

The report also mentions RBC’s revenue/GMs/EPS estimates for NVIDIA Corporation (NASDAQ:NVDA) for the quarter: “$1100mil (flat Q/Q)/55.0%/$0.18 vs. Street at $1102mil/53.9%/$0.19. For OctQ, we expect $1172mil (+6.5% Q/ Q)/54.5%/$0.24 vs. Street at $1155mil/54.0%/$0.23.”

RBC’s bull thesis on NVIDIA

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In making their bull case for NVIDIA Corporation (NASDAQ:NVDA), Freedman et al. note they currently hold the highest price target for the firm. They say their bullishness is due to three reasons: First, the fact that “the semiconductor industry should “i) be valued on a FCF ex-cash multiple and ii) should be valued at higher FCF ex-cash multiples (1-3 turns more depending on the company) due to lower future cyclicality and steadier growth. Second, we believe that NVDA should increase its debt load towards a higher debt-equity capital structure. Third, we think that the Street may begin to reward NVDA as it diversifies its end markets with its GRID and auto customer expansion. Stern OpEx controls through the expansion will also be important to maintain management credibility through higher growth expectations in these segments.”

RBC currently rates NVIDIA Corporation (NASDAQ:NVDA) as Outperform with a price target of $26.