Shares in Nvidia (NASDAQ: NVDA) rallied as much as 6% in after-hours trading on Thursday as the chipmaker announced its 2020 1st quarter results, which included EPS well ahead of consensus expectations. However, those gains were quickly erased when the company didn’t provide an outlook for the full year.
The market had been nervously anticipating the results after a tough year for the company. Nvidia is also seen as a bellwether stock among chipmakers and investors are looking for an indication of how other stocks might do.
Sales in Line, Earnings Beat Consensus
Nvidia’s revenue for the quarter was $2.22 billion, down 31% from a year ago, but in line with expectations. However, EPS, which was expected to be between $0.79 and $0.81, was reported at $0.88. These numbers still mark a 57% decline from the $2.05 Nvidia reported a year ago.
The company is also returning more than $3 billion to shareholders. In the 4th quarter of 2019, it bought back $700 million of its own stock and it has already paid $97 million in dividends this year, with another $0.16 dividend being declared for the 1st quarter.
Gaming Revenue Lower, but Better than Expected
Gaming revenue was $1.05 billion, down 39%, but quite a lot higher than expected. Revenue from professional visualization products came in at $266 million, up 6% for the year, while data centre revenue fell 10% to $634 million.
Automotive revenue showed the best improvement, growing 14% to $166 million. OEM revenue fell 74% to $99 million – this reflects the loss of revenue from cryptocurrency mining processor sales, which generated $289m in the 1st quarter last year.
Gaming remains the most important segment for the company, despite its contribution falling significantly. The company is still struggling to move its inventory of GPUs, which is likely to weigh on earnings for at least another quarter. While the data centre segment remains a key focus for the company, the industry remains depressed for now.
No 12-month Outlook
The general slowdown in data centre revenue, the escalating trade war, and nervousness about China’s economy have added to uncertainty for the entire sector. CFO, Colette Kress said: “The data-center spending pause around the world will likely persist in the second quarter and visibility remains low.”
Cisco has already warned that it will post a revenue decline for the year, and now Nvidia was reluctant to give guidance for the remainder of the year ahead.
For investors convinced of the company’s long-term potential, the current level of uncertainty may be offering a good entry point. But, for investors looking for clarity, this report didn’t provide it.
The uncertainty may, however, provide some short-term opportunities. If the stock price was to break this week’s low at $157.41, a move down to the $147 to $150 range would likely be on the cards. Conversely, a break of $192 would probably attract all the sidelined buyers a sharp rally would follow. For now, Nvidia can be treated as a trading stock.
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