Nvidia Earnings Preview: What We’re Watching Thursday

November 8th, 2011 by Trefis Team
-33.57%
Downside
140
Market
92.84
Trefis
NVDA: NVIDIA logo
NVDA
NVIDIA

Source: Jon Peddie Research, Trefis Estimates

Nvidia (NASDA:NVDA) is expected to report its Q3 earnings on Thursday. Nvidia’s stock hinges primarily around broader PC market strength and how GPU attach rates are figuring. These attach rates are highest in Europe at 80%, followed by 60% in China. [1] Given that Western Europe and the U.S. are facing sluggish economy, the question that emerges is will Nvidia’s upcoming Q3 2011 results suffer? We think that Intel (NASDAQ:INTC) and IBM’s (NYSE:IBM) results have shown that the PC market is still not as bad as previously thought and enterprises are willing to upgrade technology. These trends along with recent data releases suggest that Nvidia may post good results.

Our price estimate for Nvidia stands at $19.90, implying a premium of about 35% to the market price.

See our full analysis for Nvidia

Professional GPUs Important, Possible Growth in Q3

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We estimate that professional graphics card units constitute about 35% to Nvidia’s business, thereby making it the single most important business segment. Given that the enterprises have demonstrated the willingness to spend on upgrading their workstation equipment, it is likely that this could have driven growth in professional GPU shipments in Q3 2011. Given that Nvidia owns a very large share of this market, the impact would be clearly visible.

Discrete GPU Growth

According to latest press release from Jon Peddie Research, the overall graphics shipments grew by 18.4% in Q3 of 2011 compared to the same quarter last year, and by 16.7% compared to Q2 2011. [2]

This bodes well for Nvidia which has kept GPU attach rates high despite the launch of Intel’s launch of CPU/GPU hybrid processors Sandy Bridge. The growth in PC shipments in emerging markets like China will likely show up in Nvidia’s results, and AMD (NYSE:AMD) supply issues could further help Nvidia.

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Notes:
  1. Intel, Microsoft, Nvidia: Implications Of Soft PC Report, Barron’s, Oct 13 2011 [↩]
  2. Q3 graphics shipments up 16.7% over last quarter 18.4% over last year, Jon Peddie Research Press Releases, Oct 31 2011 [↩]