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Feb. 9, 2017, 12:05 p.m. EST

Nvidia earnings: Can hottest stock of 2016 find another gear?

Nvidia investment in AI and driverless cars will need to pay off to match raised expectations for videogame specialist

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By Jennifer Booton and Jeremy C. Owens, MarketWatch


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Nvidia Chief Executive Jen-Hsun Huang has promised to deliver big on driverless cars.

Nvidia Corp. had a ridiculous 2016, bringing in more profit in the first nine months than it did in all of 2015, and it is expected to add record holiday-quarter sales after the market closes Thursday. As an encore, Nvidia will simply attempt to become a major supplier to the automotive sector, a name brand in more homes and a company worth the largest stock gain of 2016.

Nvidia /zigman2/quotes/200467500/composite NVDA +0.19%   was an in-the-shadows high-end videogame-gear specialist that survived the dot-com crash and recession with what many believed to be a niche business. It became the best-performing S&P 500 /zigman2/quotes/210599714/realtime SPX +0.85%  stock of 2016 thanks to a breakthrough in deep learning that has immediate applications in self-driving cars and data centers, two revenue segments that didn’t exist for Nvidia before 2016 yet could hit annual revenue of $1.3 billion.

Surprisingly, even after a very public short call, Nvidia has not slowed in 2017. Chief Executive Jen-Hsun Huang took Intel Corp.’s /zigman2/quotes/203649727/composite INTC +0.32%  abandoned stage at the CES keynote and made a pitch to consumers and a strong case that his company can become a legitimate tier-two automotive supplier. The stock reached record highs again Tuesday and is up another 11.6% in 2017.

Analysts will be looking to Nvidia’s forecast tightly to see if it will justify the price in 2017. Projections now call for Nvidia to continue boosting profit and revenue at a rate most mature public companies would not recognize, so any forecasts or executive chatter about future moves could be closer watched Thursday than Nvidia’s incredible growth of 2016.

Read also: Nvidia sets high target for 2017

Here’s what to expect:

Earnings: Sell-side analysts surveyed by FactSet expect Nvidia to report GAAP profit of 83 cents a share, compared with 44 cents in the year-earlier period. Excluding one-time items, they call for non-GAAP earnings of 98 cents a share. Contributors to Estimize, a software platform that uses crowdsourcing from hedge fund executives, brokerages and buy-side analysts to predict earnings, expect Nvidia on average to report adjusted profit of 89 cents a share.

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Nvidia and Audi predict self-driving car by 2020

Nvidia, a leader in self-driving technology, announced partnerships with Bosch and Audi at CES 2017. Rob Csongor, Nvidia's automotive general manager, talked to MarketWatch about the company's promise to have a self-driving car on the road by 2020.

Nvidia has surpassed both consensus estimates consistently in the past five quarters, many by a wide margin. According to Estimize, Nvidia posted one of the largest beats, percent-wise, last earnings season among S&P 500 companies.

Revenue: The company is expected to report revenue of $2.1 billion, compared with $1.4 billion in the year-earlier period, according to the FactSet and Estimize consensus estimate. Nvidia has topped both the FactSet and Estimize consensus estimates in each of the past six quarters. In the fiscal third quarter, Nvidia beat the FactSet consensus by more than 18%, as management pointed to strong demand in its core GPU business and progress it has made in chips for virtual reality, data centers and autonomous cars.

See also: Want to invest in self-driving cars? Check out the chips

“Nvidia has left very little reason to believe that any of these businesses will take a step back in future quarters,” a group of analysts at Estimize wrote.

Stock reaction: Nvidia’s stock has increased an average of 14% on the day following its earnings report in the past six quarters.

In the calendar-year 2016, Nvidia’s stock soared nearly 224%, and they are now up a whopping 354% from 12 months ago, climbing nearly 70% in the past three months alone. The stock has drastically outperformed the S&P 500, which is up just 7.6% in the past three months and 22% in the past year. The average rating on Nvidia’s stock is the equivalent to buy, while the average price target is $104.59, which implies a decline from recent trading prices. Shares of Nvidia closed at $119.13 on Tuesday.

See also: Citron adds Nvidia to short list

/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 501.63
+0.94 +0.19%
Volume: 11.55M
Sept. 22, 2020 2:18p
P/E Ratio
91.78
Dividend Yield
0.13%
Market Cap
$309.28 billion
Rev. per Employee
$882,428
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/zigman2/quotes/210599714/realtime
US : S&P US
3,308.85
+27.79 +0.85%
Volume: 1.38B
Sept. 22, 2020 2:18p
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/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 49.88
+0.16 +0.32%
Volume: 13.09M
Sept. 22, 2020 2:18p
P/E Ratio
9.18
Dividend Yield
2.65%
Market Cap
$211.46 billion
Rev. per Employee
$659,665
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