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NVIDIA Tegra4 Solid, Cash A Concern

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NVIDIA Corporation (NASDAQ:NVDA) posted October quarter results that were in line with Sterne Agee estimates. Tegra4 from NVIDIA posted an impressive growth of 111% quarter on quarter fueled by Automotive and Xiaomi handsets. The guidance for the January quarter was also in line with Sterne Agee estimates.

NVIDIA Tegra4 Solid, Cash A Concern

However, investors will be mostly interested in how far the company can maintain a sustainable streak of dividend and buybacks with 80% of the balance sheet cash now offshore, according to analyst Vijay Rakesh at Sterne Agee

Impressive numbers

Rakesh believes that overall performance of NVIDIA Corporation (NASDAQ:NVDA) was solid, and shareholders were given good returns though the computing segment was on the decline. Earnings per share for the October quarter came in at $0.26 on revenues of $1.05 billion compared to the consensus estimate of $0.19 on revenue of $1.05 billion.

Segment wise, the analyst notes that NVIDIA’s GPU segment increased 2.1% quarter on quarter backed by the recovery in the desktop, offset by the sluggish demand of low priced notebooks. High end computing gained 6% quarter on quarter, whereas Quadro in workstation surged 5% quarter on quarter.

Handset Automotive Tegra increased 111% quarter on quarter to $111.2 million and the automotive sector contributed 25% to Tegra.

NVIDIA Corporation (NASDAQ:NVDA) announced that its Tegra 4i has been given a certification from one of the providers in the United States, and its Grid server is also receiving good reviews from Server-Networking OEMs.

Sustaining dividends, buybacks a concern for NVIDIA

Rakesh notes that NVIDIA Corporation (NASDAQ:NVDA) has paid $43.4 million in dividends to shareholders and repurchased 14.6 million shares through the previously announced $750 million accelerated share repurchase agreement. The company has an accelerated buyback plan to $1.286 billion through January 2016, but the main concern of investors might be the sustainability of these dividends and buybacks. The main reason behind the concern is that the company generates major portion of its sales and cash from overseas, with 21% of the $3.03 billion on the balance sheet is onshore. Analysts maintain that returning cash and maintaining same rate of dividend may be an important catalyst to the stock.

For the January quarter, NVIDIA has guided revenue to be flat $1.05 billion (+/- 2%) versus consensus estimate $1.08 billion. Gross margin is expected to be around 54.5% compared to the consensus estimate of 55.1%. The company is proud of its Tegra4 and expects it to surge in the fourth quarter, as well.

 Sterne Agee analysts maintain a Neutral rating on NVIDIA Corporation (NASDAQ:NVDA).

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