NVIDIA Corporation (NASDAQ: NVDA) is scheduled to report Q1 fiscal 2019 earnings after the closing bell on Thursday, May 10. Ahead of earnings, NVDA has been climbing closer to its all-time high of $254.50 it hit in mid-March. The stock closed at $250.40 yesterday and was up slightly in pre-market trading this morning.
After better-than-expected earnings reports from competitors Intel Corporation (NASDAQ: INTC) and Advanced Micro Devices, Inc. (NASDAQ: AMD), some analysts have suggested this could indicate a strong quarter for NVDA, although expectations are high for tomorrow’s report.
For the quarter, NVDA is expected to report adjusted EPS of $1.65 on revenue of $2.91 billion, according to third-party consensus analyst estimates. NVDA’s own guidance calls for $2.90 billion in revenue, plus or minus 2 percent. In the prior-year period, the company earned $0.79 on revenue of $1.94 billion. Also, the company has beat both earnings and revenue estimates in the past eight quarters.
Gaming and Data Center
The gaming segment still makes up a majority of the company’s revenue, and it has been its second-fastest growing segment behind data center. In Q4 fiscal 2018, gaming revenue was up 29 percent year over year to $1.74 billion. For all of fiscal 2018, gaming revenue increased 36 percent year over year to $5.51 billion. When NVDA reports on Thursday, analysts are expecting gaming revenue to be around $1.6 billion, up from $1.02 billion in the prior-year period.
Management has attributed strength in the gaming segment to continual growth in games that require the higher-end of their products. Strong sales of the Nintendo Switch, which uses NVDA’s Tegra processor, was another factor management cited as a growth contributor on last quarter’s earnings call. Management also acknowledged that cryptocurrency mining has been driving demand in the gaming segment as well, but it is difficult to quantify how much of their business comes from it.
NVDA’s data center segment is its second largest by revenue and has been its fastest growing recently. Last quarter, revenue was up 105 percent year over year to $606 million. For all of fiscal 2018, revenue in the segment was up 133 percent year over year to $1.93 billion.
NVDA launched the Tesla V100 GPU in Q2 fiscal 2018 and it has been a major driver of growth in the data center segment as sales ramped up over the past two quarters, according to management. Analysts are expecting data center revenue to come in at $656 million, up from $409 million in the prior-year period.
Automotive and Professional Visualization
Both the automotive and professional visualization segments have been two of the NVDA’s smaller segments, although management has said it is optimistic about the growth prospects of the two.
At CES 2018 in January, NVDA announced the DRIVE Xavier system on a chip (SoC) would start shipping to customers in a limited amount this quarter. The company has also announced numerous partnerships with major car companies and parts manufacturers that will use its autonomous vehicle platform, DRIVE PX.
When NVDA last reported, automotive revenue was up 3 percent year over year to $132 million and professional visualization revenue was up 13 percent to $254 million.
CLOSE TO ALL-TIME HIGH. Since the end of February, NVDA has climbed to the low-$250 range several times, but hasn’t been able to break higher than its all-time high of $254.50 hit on March 13. Over the past year, the stock is up 143.25 percent, outperforming the S&P 500 (SPX) and Nasdaq 100 (NDX) by a wide margin. Chart source: thinkorswim® by TD Ameritrade. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.
Options Trading Activity
Around NVDA’s upcoming earnings release, options traders have priced in about a 5.7 percent stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. As of this morning, implied volatility was at the 44th percentile, not too high ahead of the report.
In short-term trading at the May 11 weekly expiration, calls have been active at the 250 and 260 strike prices, while puts have been active at the 240 strike. At the May 18 monthly expiration, recent trading has been a lot heavier on the call side and concentrated at the 250 strike.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.
What’s Coming Up
Next week there is a string of companies from the retail sector reporting earnings. Home Depot Inc. (NYSE: HD) is scheduled before market open Tuesday, May 15, Macy’s Inc. (NYSE: M) before market open Wednesday, May 16, and Walmart Inc. (NYSE: WMT) before market open on Thursday, May 17. Deere & Company (NYSE: DE) is also scheduled to report before the open on Friday, May 18.
Some of the next major economic reports coming up include the consumer price index (CPI), which is released tomorrow morning. Next week, April retail sales are released the morning of Tuesday, May 15, and April housing starts are released the morning of Wednesday, May 16. If you have time, check out today’s market update for a look at what else is going on.
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