On Wednesday, Nvidia’s (NVDA) fiscal 2024 first-quarter results far exceeded Wall Street expectations. But as strong as the results are, the chipmaker’s guidance for its current quarter was even stronger, driving shares to a new all-time high in after-hours trading. Revenue for the three months ended April 30 fell 13% year-on-year to $7.19 billion, but was still well above analysts’ forecast of $6.52 billion, according to the consensus estimate. Refinitiv. Adjusted earnings per share (EPS) fell 20% year on year, to $1.09, though it still beat expectations by 92 cents per share, according to Refinitiv data. Adjusted gross margin of 66.8% beat analysts’ estimate of 66.5%, according to FactSet. Shares of the semiconductor company jumped nearly 30% in post-trade trading on Wednesday, to around $381 apiece. The semiconductor company’s market capitalization gained $220 billion in the extended hours session, taking it to around $975 billion. That compares to a current market capitalization of $174 billion for competitor and club member Advanced Micro Devices (AMD). Bottom line There’s no overstating how awesome this release was. With the stock up more than 100% year-to-date, the bar was set high. But the reported results easily exceeded even the most optimistic expectations. The focus on the future, however – aided by growing demand for Nvidia’s data center chips, which power generative artificial intelligence (AI) and big language models – was nothing short of breathtaking. Nvidia’s technology has become essential to the AI ecosystem, helping to power big language models like OpenAI’s viral ChatGPT. In addition, the phenomenal sales guidance for the current quarter – one of the strongest relative to expectations we have ever seen – will have an even greater impact on the bottom line, given that the gross margin guide of management was significantly ahead of Wall Street models prior to the earnings release. “We are going through this moment as we speak, as the global data center [capital expenditure] the budget is limited. At the same time, we’re seeing incredible orders to retool the world’s data centers, so I think you’re seeing the beginning of…call it a 10-year transition to basically recycle or reclaim the world’s data centers and the build like accelerated computing,” CEO Jensen Huang said on Nvidia’s post-earnings conference call. He added, “You’ll have a pretty dramatic shift in data center spending from traditional computing to accelerated computing, with a smart combination, smart switches, of course. [graphics processing units, or GPUs] and the workload will be mostly generative AI.” Ultimately, today’s post reinforces our belief that Nvidia is in rarefied territory, deserving of being the second name Jim Cramer has ever named as “own it, don’t trade it” – Apple (AAPL), of course, being the first Our rating and price target, which we plan to increase, are under review. Nvidia’s second quarter of fiscal year 2024, management has forecast sales, adjusted gross margin and capital expenditures on a non-GAAP or generally accepted accounting principles basis. operating income of $1.90 billion, other income of about $90 million and a tax rate of 14% (plus or minus 1%) does not provide a forecast for EPS, analysts at Truist Wednesday noted that the implied earnings forecast is between $1.94 and $2.14 per share. At the midpoint of $2.04 per share, that’s nearly double the $1.06 per share that Street was waiting. Today’s results, as well as the outlook, demonstrate that Nvidia, often hit for its high valuation, is more often than not much cheaper than it appears on initial estimates. Going into print, the street was modeling adjusted EPS for the full year at $4.59 per share. Adding today’s EPS result of $1.09 with the median estimate of $2.04 from the implied guidance for the current quarter, it becomes clear that Nvidia is on course to reach an EPS of 3 $.13 in the first half of its fiscal year alone. Combined with the company’s belief that generative AI has “extended Nvidia’s data center visibility over a few quarters” with “significantly higher supply for the second half,” Wall Street valuations look way too low. And we expect plenty of upside revisions once analysts update their models. Quarterly Commentary Data center sales in the reported quarter represented a new record for the company, driven by increased demand for generative AI and large language models. Demand for games was impacted by the continued effort to normalize channel inventories, as well as lower demand resulting from the macroeconomic downturn. On a sequential basis, however, sales increased thanks to the new GeForce RTX 40-series GPUs. Professional display unit revenue also declined on a year-over-year basis, a result of efforts to normalize channel inventory levels. However, it increased sequentially due to improved demand for desktop and mobile workstation GPUs. Automotive sales, while below analysts’ expectations, showed superb growth, boosted by sales of Nvidia’s self-driving platforms and AI cockpit solutions. Nvidia said Wednesday that its automotive design earnings pipeline over the next six years now stands at $14 billion, up from $11 billion a year ago, which should provide “visibility into the continued growth over the next few years. Capital Allocation In the first quarter of its 2024 fiscal year, Nvidia returned $99 million to shareholders via dividends. At the end of this quarter, $7.23 billion remained under the company’s current stock repurchase authorization, which runs through December 2023. (Jim Cramer’s Charitable Trust is long NVDA, APPL, AMD. See here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan, May 30, 2017.
Tyrone Siu | Reuters
NvidiaFirst-quarter fiscal 2024 earnings from (NVDA) on Wednesday far exceeded Wall Street expectations. But as strong as the results are, the chipmaker’s guidance for its current quarter was even stronger, driving shares to a new all-time high in after-hours trading.
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