Nvidia Was a Bit Too Amped Up -- Heard on the Street
November 18 2020 - 8:01PM
Dow Jones News
By Dan Gallagher
Sometimes playing even a perfect game isn't enough.
Nvidia reported strong fiscal third-quarter results Thursday
afternoon, managing to beat some already aggressive targets laid
out by Wall Street. Revenue set new records at both the company's
key videogaming and data center segments, with sales for the latter
exploding 162% year-over-year to hit $1.9 billion. Gaming revenue
jumped 37%, exceeding $2 billion for the first time on a quarterly
basis, thanks to strong demand for the company's latest processors
-- and that was with supply shortages that the company said
Thursday would take a few more months to clear.
The stock, however, slipped about 2% in after-hours trading.
Nvidia projected overall revenue growth of 55% year-over-year for
the fiscal fourth quarter ending in January -- well above the 41%
expected by analysts. But the quarter includes an extra week that
might not have been fully factored into Wall Street's targets, and
Nvidia did note that it expects a sequential decline in its data
center segment for the quarter. Analysts had been expecting a small
sequential rise for that segment.
Mostly, though, Nvidia's problem is that investors have run its
stock up so much. Even great numbers weren't enough. Nvidia's share
price is up more than 128% for the year -- the biggest gainer by
far on the PHLX Semiconductor Index. It also has been trading at a
record-high valuation of more than 50 times forward earnings, more
than twice its peer group's average.
So a breather seems due, even with a strong gaming cycle still
ahead. The company's new Ampere gaming chips are flying off the
shelves, with Chief Financial Officer Collette Kress saying on the
company's conference call that several key retail partners "sold
out instantly." Nvidia's gaming business also should be helped by
strong holiday demand for the Nintendo Switch console, which uses
its processors. Finally, the company said sales of its core data
center processors also will grow in the quarter, explaining that
the projected sequential decline was more due to the recently
acquired Mellanox business.
Nvidia, in other words, is still flying high. The stock had just
already reached thin air.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
November 18, 2020 19:46 ET (00:46 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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