Stock of the week - NVIDIA (27.05.2021)

NVIDIA (NVDA.US), one of the largest manufacturers of graphics cards in the world, released its fiscal first-quarter results after Wednesday’s market close. Given the fact that NVIDIA shares have rallied roughly 15% during the past week, the release was widely watched by analysts and investors. Let’s have a look at key takeaways from the company’s results and a recent stock split announcement. 

Record results and upbeat guidance

NVIDIA’s first-quarter results for its fiscal 2022 (three months ended May 2, 2021) came in above market expectations. The company reported record revenue of $5.66 billion, up 84% from a year earlier and up 13% from the previous quarter. Analysts estimated revenue of $5.41 billion. The chipmaker reported record sales from the company’s Gaming, Data Center and Professional Visualization platforms. NVIDIA’s EPS of $3.66 (+103% YoY, +18% QoQ) topped the consensus estimate of $3.31 as well. Moreover, the graphics cards manufacturer issued a bullish forecasts as it now expects fiscal Q2 revenue of $6.17 to $6.43 billion, well above analysts’ forecasts of $5.47 billion.

Gaming and cryptocurrencies

While analysing NVIDIA’s fundamentals, one has to take 2 specific factors into consideration, namely gaming and cryptocurrencies boom. As a matter of fact, gaming revenue spiked as much as 106% as the company remains one of the major beneficiaries of the increased interest in gaming throughout the pandemic. Even though many suspect that gaming industry might be under pressure once lockdown are lifted and we get back to normal, the industry is still expanding and NVIDIA is able to take advantage of that.

Also, NVIDIA’s graphics cards are widely used by cryptocurrency miners. Back in February the company released new processors specifically for mining crypto (called CMP). NVIDIA booked $155 million in revenue from CMP cards in its fiscal Q1 and expects sales of $400 million in the current quarter. Therefore, it seems that cryptocurrencies boom might significantly contribute to the company’s results in the future - the question remains, how long will this crypto boom last.

The upcoming stock split

It is also worth to note that there was a major announcement in recent days (specifically on May 21). The company intends to enact a 4-for-1 stock split. Despite the fact that the operation should be seen as neutral for the stock price, investors witnessed many examples when it actually turned out to be a bullish signal (think about Apple or Tesla - their shares became more accessible to a larger number of investors following a stock split). In fact, the announcement have probably contributed to the recent rally in the chipmaker’s stock. NVIDIA’s shareholders will vote on the proposed split during the company's annual meeting on June 3.

Despite upbeat results and optimistic forecasts, NVIDIA shares are adding just 0.50% in today’s pre-market trading. The price bounced off the 200-day moving average (green line) last week and rallied amid stock split announcement and falling US Treasury yields. All-time highs may be found just slightly higher. The area at $585 cen be viewed as the nearest support level. Source: xStation5