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Barclays Note: NVIDIA Corp.: Impressive Quarter Leaves Little to Not Like
Stock Rating Overweight
Industry View Neutral
Price Target USD 300.00
Price (10 May 2018)USD 260.13EPS FY1 (E)7.26EPS FY2 (E)8.42
Market Cap (USD bn)157.9084
Ticker NVDADelivered a strong beat and raise with every segment outperforming and GMs well ahead as well. Despite tough comps in Datacenter, that business still grew +71% Y/Y and most importantly momentum in Inference began to accelerate (shipments to Cloud doubled Q/Q), another step toward sustained multi-year demand (see AI: 3 May 2018).
Core Sizing up Inference, Competition, and Upgrading NVDA to OW,Gaming also benefits from the strong traction of recent titles Fortnite/PUBG, which should drive growth well into the year especially as pricing normalizes and Volta launches.
Gaming was strong in April ($289M crypto and gaming channel fill) but July seems very achievable with crypto just 1/3 April and gaming expected up less than seasonal (we model +6%). Net net, this was a clean beat and raise that should be just one of many as the company asserts itself at the forefront of AI and the dominant player in Gaming.
PT moves to $300.Q1 Well Ahead with Record GMs: Reported revenue of $3.21B (+10.2% Q/Q) well above consensus $2.91B driven by Gaming ($1.72B vs. St. $1.61B-eSports, Fortnite, etc.), Datacenter ($701M vs. St. $656M-V100, cloud Inference) and OEM & IP ($387M vs. St $161M-with $289M Crypto sales). Auto was also ahead ($145M vs. St. $140M-transition from Infotainment to Autonomous) along with ProViz ($251M vs. $248M).
GAAP GMs hit a record 64.5%, well above St. 62.7% (segment mix, shift to high-end, crypto), while opex was modestly higher ($773M vs. St. $770M). Combined with a lower GAAP tax rate (5% vs. St. 12%-$0.15 benefit), this yielded GAAP EPS of $1.98, well above St. $1.47.Q2 Better Off Strong April: Guided revenue to $3.04-3.16B (-5% to -1% Q/Q), above St. $2.94B driven by Gaming (popular titles, pent up GPU demand).
We model Core Gaming higher ($1.56B vs. prior $1.42B) +6% Q/Q although below seasonal following the strong April (normal 1H seasonality). We also raise our Datacenter estimate ($793M vs. prior $773M) +13% Q/Q as Volta’s datacenter ramp continues (Inference pipeline growing on top of April doubling). Importantly, Crypto revenue drops to 1/3 of April’s levels.
GAAP GM’s above (63.3% vs. St. 62.5%-mix) offset higher opex ($810M vs. St. $786M-investment in Gaming, AI, Auto) to yield implied GAAP EPS of $1.58-1.69, well ahead vs. St. $1.46.
