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By most measures,
Nvidia
showed he had a good year by releasing his results on Wednesday night. But with semiconductor companies enjoying strong demand for too few chips, investors are demanding flawless excellence.
Sure enough, shares of Nvidia (ticker: NVDA) were down 8% on Thursday, as Wall Street struggled with the match between the company’s earnings and a stock trade at 41 times earnings estimates for the next 12. month.
Jefferies semiconductor analyst Mark Lipacis attributed the stock’s weakness to stable quarter-over-quarter growth in its data center business, as well as bad memories from investors of Nvidia regarding volatile Bitcoin trading.
In recent years, graphics cards powered by Nvidia chips – and traditionally designed for video games – have become popular in machines used to mine bitcoin and other cryptocurrencies.
In its data center segment, Nvidia saw impressive growth year-over-year, nearly doubling fiscal fourth quarter revenue to $ 1.9 billion. Colette Kress, CFO of Nvidia, said sales growth was being driven by Nvidia’s new graphics processing unit, or GPU architecture, as well as the acquisition of Mellanox from the company.
Data center sales, however, were flat compared to the third quarter.
“The flattened quarter-over-quarter growth was disappointing for a high P / E stock, and it did not meet the higher expectations on the long side,” Lipacis wrote. “We are seeing that data center spending on processors has recently shown periods of above-trendline growth followed by periods of digestion, and the data center is currently in a period of digestion.”
Lipacis wrote that times like this in the past turned out to be buying opportunities. “More importantly, NVDA’s last sale during a data center digestion period was between 4Q18-1Q19, which turned out to be a good time to buy the stock,” Lipacis wrote. .
In terms of cryptocurrencies, investors appear concerned that Nvidia’s recent results have been boosted by Bitcoin’s latest rally, which recently crossed the $ 50,000 level. But past crypto rallies have proven problematic for Nvidia. When digital currency prices fell rapidly in 2018, miners quickly sold their graphics cards. The flood of cheap cards damaged Nvidia’s income and left it with a significant inventory.
Lipacis notes that in the fourth quarter of that year, sales of Nvidia’s video game segment fell to $ 954 million from $ 1.76 billion in the previous quarter. The shares fell to around $ 124 from $ 292 in three months, he wrote.
Nvidia has taken steps to address this issue, thanks to the popularity and performance of its new Ampere-based graphics chips.
Last week, Nvidia announced a line of specialty products for cryptocurrency miners, estimating sales of these units to amount to $ 50 million in the fiscal first quarter, which ends in April. The company is also limiting the mining capabilities of its low-end RTX 3060 chips and graphics cards, forcing crypto miners to pay for more expensive cards.
CFO Colette Kress said in the earnings call that the company has no way of determining what buyers are doing with its current catalog of graphics chips.
Write to Max A. Cherney at [email protected]
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