NVIDIA Q3 Earnings Preview: Gaming, Data-Center Chips Powering Growth
Investing.com | Nov 18, 2020 07:47
- Reports Q3 2021 results on Wednesday, Nov. 18, after the close
- Revenue expectation: $4.41 billion
- EPS expectation: $2.57
NVIDIA Corp. (NASDAQ:NVDA) has emerged as the best-performing chip stock during this global health crisis. Its business has thrived as demand for its products that serve the data-center and video-gaming markets soared amid the pandemic.
As a result, the company’s share price has more than doubled, making it this year’s third-best performing S&P 500 stock. These gains have pushed its market cap to more than $330 billion, making it more valuable than the combined worth of its two main rivals—Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD).
The California-based company’s product mix caters to new trends, with a greater focus on technologies that enable remote work and virtual collaboration in stay-at-home environments. When NVIDIA releases its third-quarter earnings later today, investors will likely see another strong quarter, backed by NVIDIA’s powerful product portfolio.
NVIDIA is a provider of the key components required for all the sector's large, high-growth opportunities, including cloud-computing, artificial intelligence, robotic automation, mobile computing and internet of things.
Also, the Santa Clara, California-based company has proved over the years that it is way ahead of its rivals in terms of innovation and performance. In September, the Silicon Valley company announced a lineup of three new gaming graphics cards based on its latest “Ampere” chip architecture, saying they will deliver up to double the performance of its prior offerings in the “greatest generational leap” in its history.
h2 More Upside/h2Also in September, NVIDIA moved to further strengthen its position in the AI market when it agreed to buy SoftBank Group’s chip division ARM Ltd. for $40 billion. ARM’s technology is at the heart of the more than 1 billion smartphones sold annually. Chips that use its code and layouts are in everything from factory equipment to home electronics. The deal requires regulatory approvals from both U.S. and China.
But the majority of the company’s sales still come from PC gaming, where NVIDIA’s graphics chips create the most realistic experiences. Top-of-the-line GeForce parts cost more than many consumers spend on a whole PC.
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Due to this strength, many analysts believe NVIDIA shares will continue their escalating journey and have more upside potential. Susquehanna analyst Christopher Rolland raised his one-year price target to $610 from $560 due to NVIDIA’s strength in gaming and data center markets.
In a note to clients, Rolland wrote:
"[W]e acknowledge the possibility of shortages for Ampere in C3Q20, but encourage investors to look past the near-term supply disruption and toward the long-term, multi-dimensional growth story that should continue to play out into C4Q, early 2021, and beyond."
Bottom Line
After its powerful rise this year, NVIDIA stock doesn’t come cheap. It is now one of the most richly valued chip stocks with a price-to-earnings ratio of 99. But the company’s latest earnings will show it continues to benefit from the pandemic-driven demand and its current growth cycle is still going strong.
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