Nvidia Corporation (NVDA, Financial) was on a stunning run in 2015; however, it was brought to a halt when the company released its quarterly results. Although Nvidia managed to surpass the consensus targets on revenue and earnings, the chipmaker revised its guidance for the next quarter downwards. As a result, the stock is down over 15% since the earnings. Following the drop, Nvidia looks attractively priced as the company has multiple growth drivers going forward.
For the first quarter 2016, revenue grew 4% year-over-year to $1.15 billion. Growth was primarily due to strength in gaming, high performance and cloud, and automotive. GPU revenue and Terga processor revenue were up 5% and 4% to $940 million and $145 million respectively. These four growth drivers accounted more than 80% of revenue, an up surge from 68% previous year.
Enterprise revenue and HPC and cloud revenue were $190 million and $79 million. GAAP and non-GAAP operating expenses for the 1st quarter 2015 were $477 million and $425 million followed by GAAP net income of $134 million.
Automobile sector is a growth driver
Automotive revenue had a record quarter at $77 million, escalating 121% year over year. Nvidia’s Tegra X1 processor is the most popular processor being used in vehicles for more advanced features. With the help of Tegra X1 processor, vehicles are becoming more advanced and computerized and many safety features are added in vehicles. This technology can sense and read information and can be implemented in self-driving cars. The technology facilitates visage like self-parking ability. At GTC, 25 universal automakers and Tier 1 dealers were characterized, counting developers and researchers from companies such as Audi, BMW (BMW, Financial), Delphi (DLPH, Financial) and Elektrobit (EBC1V, Financial). Their eagerness reveals the interest, growing importance of visual computing for automotive.
Competition
Nvidia is apparently not the solitary company that desires to grow their earnings by producing smarter cars. There's a very profitable and viable market of advanced driver assistance systems (ADAS) beginning to form.
In the present model of Audi’s zFAS, two chips of Nvidia and Mobileye’s (MBLY, Financial) are being used. Both of the chips Nvidia’s Tegra K1 and Mobileye’s EyeQ3 are supplementing each other. The newer generation of both chips, Drive PX and EyeQ4 is detailed by the company. Both of the chips are great success and neither of them can be ranked, which means these products look like head-to-head competitors of each other. These new chips from Nvidia and Mobileye primarily focus on 3 factors:
- Supercomputing
- Self-driving
- Cavernous learning processing
These resolutions from Nvidia and Mobileye fulfill all the need of the carmaker, which they need in their zFAS.
Gaming segment
The gaming market endures to expand. In the second half, the company looks forward to multiple drivers, including 4K, which quadruples the number of pixels to process, virtual reality, and the liftoff of Windows 10.
Gaming revenue was $587 million, up 25% year over year, powered by the strength of its Maxwell GPU architecture and driven by the pulsating gaming market. Nvidia added the TITAN X GPU to its good books this quarter, bringing the Maxwell platform to a new level, which the company ruminates to be the gaming market major plus. The TITAN X enables gamers to enjoy the latest 4K games and virtual reality titles which deliver twice the performance and double efficiency of its predecessor, greater than even the best gaming consoles. There are now more than 55 million PCs with GeForce Experience which targets to convey the ease and the community welfares of the console to the PC.
As games get more demanding, people are more expected to upgrade. Games characteristically turn out to be more graphically powerful as game designers make games look more realistic through more comprehensive character replicas and surroundings, and other hardware-intensive technologies.
Conclusion
Although Nvidia may struggle due to the slump in the PC market, the company can offset the losses by increasing its presence in the automobile and gaming sectors. The company is diversifying its revenue stream which will make it less prone to industrywide slump. In addition, the company’s Tegra chips continue to gain traction and it looks like the company’s massive investment in developing Tegra has paid off. All in all, Nvidia is a great buy on the dip.
