What Factors Led To A 35% Decline In Nvidia’s Stock Price Over The Last 12 Months?

August 16th, 2019 by Trefis Team
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Nvidia (NASDAQ:NVDA) is the market leader in graphic processor units (GPUs), and the company has seen its stock price decline by around 35% since fiscal Q2 2019. However, the stock price could trend higher in the near term, given the top line and bottom line beat in Q2 fiscal 2020. In this note we discuss the factors that contributed to the fall in stock price over the last 12 months. You can look at our interactive dashboard analysis ~ Why Did Nvidia’s Stock Price Fall Around 35% Over The Last 12 Months? ~ for more details. In addition, you can see more of our data for Information Technology companies here. 

Nvidia’s Stock Has Fallen Around 35% From $250 During The End of Q2 Fiscal 2019 To $161 As of Q2 Fiscal 2020 End, Primarily Due To A Decline In Revenues And Adjusted Net Income Margin.

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#1. Revenues Declined 17% Primarily Due To Lower GPU Sales

  • Total revenues declined from $3.1 billion in Q2 fiscal 2019 to $2.6 billion in Q2 fiscal 2020.
  • The decline was primarily led by the company’s GPU segment, which refers to revenue from Nvidia’s graphic processing units used in PCs and data centers.
  • GPU sales declined from $2.7 billion in Q2 fiscal 2019 to $2.1 billion in Q2 fiscal 2020, primarily led by lower gaming PCs and notebook sales, amid a slowdown in the Chinese economy.
  • Tegra processor business revenue have increased slightly from $467 million in Q2 fiscal 2019 to $475 million in Q2 fiscal 2020, led by higher AI demand for automobiles.

#2. Adjusted Net Income Declined By 37% Since Q2 Fiscal 2019, Led By Lower Margins

  • Nvidia’s adjusted net income declined from $1.2 billion in Q2 fiscal 2019, to $0.8 billion in Q2 fiscal 2020.
  • This can be attributed to lower revenues and contraction in adjusted net income margin.
  • Adjusted net income margin declined from 38.7% in Q2 fiscal 2019 to around 29.5% in Q2 fiscal 2020.

#2.1 Total Costs Grew 5% Primarily Led By Higher R&D Expenses.

  • COGS as % of revenue increased from 36.8% in Q2 fiscal 2019 to 40.2% in Q2 fiscal 2020.
  • R&D as % of revenue increased from 18.6% in Q2 fiscal 2019 to 27.3% in Q2 fiscal 2020.
  • SG&A as % of revenue increased from 7.6% in Q2 fiscal 2019 to 10.3% in Q2 fiscal 2020.
  • Interest & Other Expenses as % of revenue declined from -0.7% in Q2 fiscal 2019 to -1.4% in Q2 fiscal 2020.
  • Effective Tax Rate increased from 6.7% in Q2 fiscal 2019 to 8.9% in Q2 fiscal 2020. Non-GAAP Adjustments as % of revenue increased from 3.5% in Q2 fiscal 2019 to 8.1% in Q2 fiscal 2020.

#2.2 Adjusted EPS Declined 36% Led By Lower Revenues And Margins

  • Adjusted EPS declined from $1.94 in Q2 fiscal 2019 to $1.24 in Q2 fiscal 2020.
  • This can be attributed to lower adjusted net income, partly offset by modest decline in no. of shares.
  • Shares outstanding declined from 625 million in Q2 fiscal 2019 to 616 million in Q2 fiscal 2020.

#3. Price To Earnings Multiple For Nvidia Grew 2% Since Q2 Fiscal 2019

  • The P/E Multiple for Nvidia declined in fiscal 2019 but recovered in the beginning of fiscal 2020. It grew slightly from 33.2x in Q2 fiscal 2019 to 33.9x in Q2 fiscal 2020, based on trailing twelve months adjusted EPS.

 

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