The first-quarter earnings season is mostly wrapped up, with 95% of S&P 500 companies already releasing results. However, the party’s not quite over yet, as we’ve still got NVIDIA Corporation (NVDA) waiting in the wings with its earnings report for the first quarter in fiscal year 2022 tomorrow afternoon.
And I and the rest of Wall Street couldn’t be more excited.
NVIDIA is a high-quality stock that dominates the graphic chips industry. The company has been in the computer graphics business for more than two decades – it invented the GPU in 1999 – so it is a well-established player. Since 2014, the company has shifted its focus to five major markets – gaming, professional visualization, data centers, auto and artificial intelligence (AI).
Now, here is why NVIDIA’s earnings report is so highly anticipated: Company management’s initial revenue outlook for the first quarter in fiscal year 2022 was for revenue of about $5.30 billion, with the majority of the company’s growth coming from its Gaming segment. However, during NVIDIA’s presentation in April, company management noted that revenue is already tracking much higher than its previous guidance for $5.30 billion. Also, growth is now expected to be across the board.
The bottom line: NVDA is a fundamentally superior stock on track for another record-breaking quarter.
Currently, analysts are calling for earnings of $3.28 per share on $5.4 billion in revenue. This translates to 82.2% year-over-year earnings growth, up from earnings of $1.80 per share in the same quarter a year ago, and 79.9% year-over-year revenue growth. Analysts have revised earnings estimates 28.6% higher in the past 90 days, so an earnings surprise is likely.
But the reality is record-breaking is par for the course for NVIDIA lately. In fact, for the fourth quarter, company management commented, “Q4 was another record quarter, capping a breakout year for NVIDIA’s computing platforms.” Revenue soared 61% year-over-year to $5.0 billion, up from $3.1 billion in the same quarter a year ago.
Fourth-quarter earnings jumped 67% year-over-year to $1.96 billion, or $3.10 per share, compared to $1.17 billion, or $1.89 per share, in the fourth quarter of 2020. Analysts were expecting earnings of $2.81 per share on $4.82 billion in revenue, so NVIDIA posted a 10.3% earnings surprise and a 3.7% revenue surprise.
For fiscal year 2021, NVIDIA reported earnings of $10.00 per share on $16.68 billion in revenue, or 73% annual earnings growth and 53% annual revenue growth. These results also topped analysts’ estimates for full-year earnings of $9.73 per share and revenue of $16.49 billion.
Interestingly, NVIDIA holds a C-rating in Portfolio Grader, making it a “Hold” heading into tomorrow’s earnings report. The truth of the matter is investors are shying away from perfectly good stocks, which is weighing negatively on NVIDIA’s Quantitative Grade, which is also a “C.” (I’ll discuss how the Quantitative Grade works more in-depth in this Friday’s Growth Investor Monthly Issue for June. If you’re interested, you can click here to sign up now.)
However, let me say now that NVIDIA’s outlook is very promising. So, I look for a fresh wave of buying pressure to drive up the stock’s Total Grade after its earnings are released.
A Major Player in the AI Space
Keep in mind that NVIDIA is also a major player in the AI space. Just last month, the company unveiled a new artificial-intelligence (AI) processor, NVIDIA DRIVE Atlan, which can be used in self-driving vehicles. The company noted that the processor can deliver more than 1,000 trillion operations per second, and it will be ready for use in 2025 vehicles. Several automakers are already relying on NVIDIA’s AI-enabled chips for their autonomous vehicles, including Volvo, which is utilizing DRIVE Orin technology in its XC90.
The reality is AI is expected to be bigger than the tech boom in the 1990s and the smartphone revolution of 2007. It will allow us to build a whole new generation of incredible innovations.
Stephen Hawking predicted that AI would be the “biggest event in the history of our civilization,” and Google’s CEO called it “more important than electricity.”
And NVIDIA is perfectly positioned to benefit. It’s one of the reasons why I recommended the stock in Growth Investor back in May 2019. If you’d like to learn more about NVIDIA and why I like it, just sign up for my Growth Investor service. Once you do, you’ll have access to my special reports, including 3 Stocks Powering the $150 Trillion AI Boom, 3 Plays for the $12 Billion Battery Opportunity and The One AI Company Set to Corner the Booming Cybersecurity Industry.
And you really couldn’t be joining at a better time. As I mentioned, I’ll be releasing my Growth Investor Monthly Issue for June on Friday. Not only will I discuss my Quantitative Grade, but I’ll also release three brand-new High-Growth Investments recommendations in the tech space and my Top 5 Stocks list.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
NVIDIA Corporation (NVDA), Alphabet Inc. (GOOGL)