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Author: Alan LittleDate: 2020-11-20

Nvidia (NVDA) shares down 1% despite Q3 beats

Nvidia (NVDA) was trading lower on Thursday after the chipmaker’s muted outlook for Q4 took the shine off a stellar Q3 report that featured earnings and revenue beats.

Nvidia (NVDA) comfortably beat the Wall Street consensus on its Q3 earnings and revenue on Thursday, but near-term guidance about capacity issues and lower consumer demand sent shares 1.64% lower in trading.

Before opening, Nvidia came in with $2.91 per share earnings and $4.73bn revenue, representing a 63% and 57% spike from a year ago, respectively.

It was also comfortably above the $2.57 EPS and $4.4bn revenue forecasts for the three-month period to 30th September.

However, investors were less enthused about a top-line earnings guidance of $4.8bn for Q4, as CFO Colette Kress said that she expected data centre revenue to fall quarter over quarter.

Nvidia’s data centre division was strong in Q3 as revenues soared 162% to $1.9bn on the back of a large purchase from an unnamed client in China.

Gaming revenues were also up 37% to $2.22bn and are likely to rise further following the launch of Nvidia’s new line of powerful GPUs.

There was a caveat, though, with Cross noting that it may struggle to meet demand due to capacity constraints and lengthy cycle times that are prevalent “industry-wide.”

While the muted outlook in one or two areas took the shine off the Q3 report, BMO Capital Markets analyst Ambrish Srivastava was still impressed overall.

He said: “NVIDIA delivered on high expectations. Near term potential disappointment on the Data Center guidance, due to the pull-in from China in the Mellanox business, will likely prove to be short-lived.”

Srivastava stood pat on his NVDA outperform rating and $650 price target.

Nvidia shares were relatively flat on Thursday, falling 1.02% to $531.66.

The latest retreat is rare for NVDA this year as it has made gains of +50% since late May.

Sources:

  • https://www.thestreet.com/investing/nvidia-lower-on-muted-data-center-outlook-after-solid-q3
  • https://www.google.com/search?q=nvidia+stock&oq=nvidia+stock&aqs=chrome.0.35i39i285i457j35i39j0i131i433j0i433j0i131i433l2j0l2.1723j1j7&sourceid=chrome&ie=UTF-8

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