The chipmaker, NVIDIA Corporation (NASDAQ:NVDA) rose over 8% this morning as the company reported earnings that beat analysts’ estimates and the firm’s outlook was bullish. Nvidia says they expect second quarter earnings to come in somewhere between $990 million to $1.05 billion, which is much higher than the analyst consensus of $976 million.
Looking at the earnings release from today, sales came in at $925 million which was down from last year’s sales of $962 million. However, it still beat analyst predictions of $916 million. NVIDIA Corporation (NASDAQ:NVDA) saw profits of $0.10 a share which was also a drop from the profit of $0.22 last year but was in line with expectations.
Nvidia’s reasoning for the bullish outlook is that Windows 8 will support different types of ARM-based chips, which Nvidia makes, instead of just x86-type chips that are dominated by Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices, Inc. (NYSE:AMD). Not to mention, demand for notebook graphics is growing as well.
Alkeon expects data growth to surpass 5G’s capabilities by 2028 [Q4 Letter]
Alkeon Growth Partners wrote at length on tech stocks and why they are defensive in their recent letter to investors, which was reviewed by ValueWalk. The fund also highlighted 5G and other advanced technologies and the investment opportunities they offer. Q4 2020 hedge fund letters, conferences and more Artificial intelligence and machine learning The Alkeon Read More
Also, Nvidia was able to score a deal with HTC to have its Tegra chip in one of the company’s smart phones that was launched in Europe and Asia.
All in all, Nvidia does have some exciting growth opportunities coming up over the next year to two years. However, I am a little worried that sales and profits were down from a year ago. Analysts clearly were not expecting much from Nvidia this quarter as their expectations were well below last year’s results.
That being said, as the PC market begins to see rising demand again, NVIDIA Corporation (NASDAQ:NVDA) will be able to grow its earnings. Not to mention its strategic partnership with mobile phone firms to have its chips in their smart phones is another huge source of growth as demand for smart phones heat up.
The stock is currently up over 8% as of this writing to $13.45. Let’s look at a breakdown for Nvidia: professional graphics make up the largest portion of the stock at 30%, followed by desktop and notebook graphics which come in at 18% and 15%, respectively. Then comes mobile and game console graphics at 7.4%.
It is important to note that the company does not pay a dividend but is sitting on a mountain of cash, around $667.88 million. Look for signs of what Nvidia can do with its cash hoard to further expand its role in certain sectors such as mobile graphics or notebook graphics.