Nvidia Corp.'s (NVDA) stock has risen 600 percent in the past two years, leading some investors to argue the shares are drastically overvalued and set for a fall. To keep its stock flying, Nvidia may have to post robust revenue and earnings growth – and offer similar guidance – when it reports second-quarter results after the market close on Thursday. There will be particular attention paid to growth rates in Nvidia's gaming, data center, and automotive segments, which saw a significant acceleration in growth over the past few quarters. The comparables from last year seem supportive of Nvidia putting up another big quarter of growth.
The Estimates
Analysts expect Nvidia to report that second-quarter revenue grew by 37.5 percent from a year ago to $1.963 billion, while EPS grew by nearly 54 percent to $0.82, according to YCharts. Revenue estimates for this quarter have been rising steadily, as have earnings estimates, meaning expectations going into the quarter are high. Nvidia has consistently beaten analysts' revenue expectations going back to the fiscal second quarter of 2016.
Gaming and Data center
Nvidia has been able to increase revenue steadily in gaming, data center and automotive, but its data center has been its driving force and its growth engine. Revenue in the data center segment has grown by nearly 365 percent since the first quarter of 2016, to $409 million as of the first quarter of 2018.
Automotive has also been a steady performer, but its growth rates have slowed recently, from 59 percent in the second quarter of 2016, to 24 percent. Gaming has been the backbone of Nvidia's meteoric rise, with revenue for the past three quarters topping $1 billion each.
Automotive Ambitions
Investors will want to see continued positive trends in gaming and the data center to be pleased this quarter. They will also be curious about the company's ambitions in automotive, as Nvidia continues to ramp up that portion of its business. According to DigiTimes, Nvidia recently made an investment in a Chinese start-up focused on developing autonomous trucks.
Shares of Nvidia have been powering higher now for some time, with its 600 percent gain outstripping the S&P 500's 17 percent rise during the same period. The stock price appreciation has been driven by the company's ability to continually drive revenue and growth higher. For the stock price to continue to rise, the company will need to show investors that it is capable of pushing those revenue numbers higher into the foreseeable future. What investors will not want to see are signs that the company is slowing down or is losing momentum.
By: Michael Kramer (Investopedia).
Photo: Tech Times.
Review: Emerging Market Formulations & Research Unit, Flagship Records.