Friday, November 10, 2006

Pre-Market - NVIDIA Corporation (Public, NASDAQ:NVDA)

CIBC notes after the close NVDA reported stellar Q3 (Oct) results of $821 mln in revs and pro forma EPS of $0.39 vs. consensus ests of $754 mln and $0.35. Firm believes the co continues to benefit from strong execution, capitalizing on the competitive opening provided by the AMD/ATI merger. Top-line upside was driven by improved mix and increased market share in NVDA's core markets of desktop, notebook and chipsets. With the hard launch of its flagship 8800 chip and Santa Rosa design wins, firm thinks NVDA remains well positioned to solidify desktop/notebook share in coming qtrs. Firm does not expect NVDA to sustain its strong position on the AMD platform, as AMD transitions ATI's chipset business to its own platform. Firm thinks NVDA could more than make up the difference on the INTC platform, though it may take some time. Firm anticipates investors will react positively to the report, despite heightened expectations heading into the call... ThinkEquity notes that NVDA is trading substantially above their Universe and faces more risks than Bulls care to admit: ASPs were down overall, die sizes are increasing, and ATI is likely to have a competitive offering in the near future. Yes, NVDA is growing faster, but firm believes this is already in the stock. Firm says NVDA EPS came in-line with Street consensus, and $0.01 above their ests. If firm keeps the patent license payments for NVDA's past usage, they get $0.35 ex-stock based compensation, not the $0.39. Firm raises thier tgt from $25 to $28. Firm believes Dell (DELL) is ramping AMD/NVDA chipsets and is now shipping consumer desktops, corporate desktops and consumer notebooks with AMD/NVDA chipsets. This is an obvious positive for Advanced Micro Devices (AMD) as well, and could begin to give DELL more of a fighting chance in the price war with Lenovo and Hewlett-Packard (HPQ)... Thomas Weisel sees multiple potential catalysts over the next six to 12 months that could drive rev meaningfully higher from current levels including 1) incremental boost from Vista rollout (not currently modeled), 2) ongoing notebook and workstation share gain opportunities, 3) expanding near-term chipset penetration, notably Intel-based solutions, 4) GeForce 8 rollout, 5) PS3 ramp, and 6) potential participation in upcoming video iPod (not currently modeled)...

Stifel downgrades NVDA to Sell from Hold following earnings. The firm says while NVIDIA turned in a very strong performance for the October quarter and they believe should continue to see share gain momentum carry over for the next several quarters, they are increasingly concerned about the potential for gross margin improvements significantly above the current guidance range. The firm believes potential for increased operational improvements is becoming more limited, and they believe risks associated with product mix shifts, increased competition from AMD in key end markets, and dilution from the proposed Portal Player acquisition could be countervailing forces that could cap gross margin improvements.

NVIDIA upgraded to Market Perform from Underperform at BMO Capital (35.29 )

Courtesy of
NVIDIA (NVDA $35.29 +0.69) had a massive qtr on the top line and beat on the bottom line. As a result, we thought we would highlight some of the important points from the earnings call and the implications for the market. Co noted their notebook GPU revenue grew 47%-46% Q/Q and over 100% Y/Y. Co expects their share gain to continue through the year and then accelerate as they see should designs wins based on Intel's (INTC) standard notebook platform. On a non-GAAP basis, gross margins were 42.9%. The gross margin percentage was negatively impacted by the higher growth in the lower margin businesses such as memory, mainstream, desktop GPUs and MCT. However, co notes each individual business unit continues to make progress in improving gross margins. Despite what might appear to be relatively flat margins, co thinks they are continuing to make progress in improving gross margins. While the co gave limited info on the balance sheet, they noted accounts receivable were down by 20 million and inventory was down by 5 million. On the outlook, co noted the magnitude of their rev growth may be difficult to forecast but they are comfortable with 5% growth even if memory declines. Co expects gross margins to show continued improvement. While the co may not make their 45% target by year end, co is comfortable with gross margin increase of 100 basis points to more in Q4. Implications for the market: NVDA appears to be benefiting from the confluence of market anticipation of the Vista release in 1H07 and taking advantage of the window of opportunity to take share as the AMD-ATYT integration continues to take place. Given the multiple catalysts going forward (i.e., desktop, notebook and consumer electronics), strong institutional support and NVDA being the only pure play left in the graphics space heading into the graphics intensive Vista rollout, we would expect NVDA to continue to see upwards momentum in today's trading.

NVIDIA: Hearing Bear Stearns raises target from $39 to $42; Soleil raises target from $36 to $41;/ FBR raises target from $36 to $40 (35.29 ) -Update-


Dan Beisiegel said...

I just wanted to complement you on the great job you are doing with this blog. Best of luck in the future.


Jamie said...

Thanks Dan,

Appreciate the complement.