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Why Is Nvidia (NVDA) Up 12.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Nvidia (NVDA). Shares have added about 12.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nvidia due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

NVIDIA Tops Q2 Earnings Estimates on Solid Revenue Growth

NVIDIA delivered second-quarter fiscal 2022 non-GAAP earnings of $1.04 per share, beating the Zacks Consensus Estimate $1.01. The reported figure also jumped a whopping 89% year over year and 14%, sequentially.

Revenues of $6.51 billion beat the consensus mark of $6.34 billion and surged 68% year over year as well. The top line also climbed 15% on a quarter-over-quarter basis.

The company reported year-over-year revenue growth across its entire end markets. Moreover, the company’s Gaming, Data Center and Professional Visualization markets registered record revenues during the quarter.

Segment Details

Beginning first-quarter fiscal 2021, NVIDIA started reporting revenues under two segments — Graphics and Compute & Networking.

Graphics include GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems.

Graphics accounted for 60% of the fiscal second-quarter revenues. The segment’s top-line figure surged 87% year over year and 13%, sequentially, to $3.91 billion.

Compute & Networking represented 40% of the fiscal second-quarter revenues. The segment comprises Data-Center platforms and systems for AI, HPC, and accelerated computing; DRIVE for autonomous vehicles; and Jetson for robotics and other embedded platforms.

Compute & Networking revenues climbed 46% year over year and 18%, sequentially, to $2.60 billion.

Market Platform Top Line Details

Based on the market platform, Gaming revenues (47% of revenues) shot up 85%, year over year, and 11%, sequentially, to $3.06 billion on higher sales across the company’s notebook and desktop gaming GPUs, and game console SOCs.

Revenues from Data Center (37% of revenues) jumped 35% year over year and 16% from the previous quarter to $2.37 billion. This year-on-year upswing was chiefly driven by the ramp-up of its Ampere architecture products into vertical industries and hyperscale customers, along with solid chip demand from hyperscale and large consumer Internet customers.

Professional Visualization revenues (8% of revenues) increased a whopping 156%, year over year, and 40%, sequentially, to $519 million. This growth mainly resulted from increased sales of notebook workstation GPUs and the ramp-up of Ampere architecture GPUs.

Auto revenues (2% of revenues) in the reported quarter totaled $152 million, up 37% on a year-over-year basis. Nonetheless, the division’s sales edged down 1%, sequentially. This year-over-year rise was primarily aided by continued recovery in the global automotive production volumes.

OEM and Other revenues (6% of revenues) climbed an astounding 180%, year on year, and 25%, sequentially, to $409 million. This uptick reflects the inclusion of Cryptocurrency Mining Processors (CMP) revenues under the market platform, which generated sales of $266 million.

Operating Details

NVIDIA’s non-GAAP gross margin expanded 70 basis points (bps) year over year and 50 bps sequentially to 66.7%, mainly on higher average selling price within desktop GeForce GPUs, along with continued growth in high-end Ampere architecture products.

Non-GAAP operating expenses flared up 22% year over year and 6% sequentially to $1.27 billion on higher compensation-related expenses, including headcount increase, and infrastructure costs.

Non-GAAP operating income jumped an astounding 103%, year over year, and 20%, quarter on quarter, to $3.07 billion.

Balance Sheet and Cash Flow

As of Aug 1, 2021, NVIDIA’s cash, cash equivalents and marketable securities were $19.65 billion, up from $12.67 billion as of Jan 31, 2021. The rise displays proceeds from debt issuance worth $5 billion.

As of Aug 1, 2021, total long-term debt (including current maturities) was $11.94 billion, up from the $5.96 billion seen in the previous quarter ended May 2, 2021. This increase reflects debt issuance of worth $5 billion.

The company generated $2.68 billion in operating cash flows, up from the year-ago quarter’s $1.57 billion as well as the previous quarter’s $1.87 billion. Free cash flow was $2.48 billion, up from the prior-year period’s $1.35 billion and from the last quarter’s $1.56 billion.

In the first half of fiscal 2022, the company generated operating and free cash flows of $4.56 billion $4.04 billion, respectively.

NVIDIA paid dividends of $100 million in the second quarter and $199 million in the first half of fiscal 2022.

Guidance

For the third quarter of fiscal 2022, NVIDIA anticipates revenues of $6.8 billion (+/-2%).

Non-GAAP gross margin is projected at 67% (+/-50 bps). Non-GAAP operating expenses are estimated to be $1.37 billion.

Capital expenditures are expected to be approximately $200-$225 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.03% due to these changes.

VGM Scores

Currently, Nvidia has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nvidia has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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