In June 2018, Nvidia Corp. (NVDA, Financial) joined the S&P 100. As of February, it now has a market cap of $97.7 billion, ranking 50th.
The company has been gaining a lot of attention for its sales growth in the semiconductor industry. As the inventor of the graphics processing unit (GPU) in 1999, it continues to revolutionize the personal computing experience with graphics semiconductor products working alongside central processing units. Its semiconductor units are also growing in use among the gaming, artificial intelligence and crypto mining markets. While gaming and artificial intelligence have driven much of the company’s recent growth, crypto has been a slight detractor.
On Feb. 14, the company released its most recent earnings results after the closing bell. Its fourth-quarter earnings showed some slowing in sales growth, decreasing the annual totals for the year but still posting impressive gains.
Revenue
Revenue for the fourth quarter missed analysts’ expectations by $30 million at $2.21 billion. Comparing to the fourth quarter of 2018, revenue was down -24.1%. For the year, however, the company ended with annual sales of $11.7 billion and sales growth of 20.6%. This figure slightly slowed its annual revenue growth, which has previously come in at 41% for the trailing 12 months and 28% annualized over the past three years. Annually, gross profit was just slightly higher in 2019 at 61% versus 60%.
Operating profit saw a substantial decrease in the fourth quarter from $1.1 billion to $294 million. Meanwhile all of the company’s indirect expenses gained more than 20% over the year. In 2019, the operating margin was only slightly lower at 32% versus 33%.
Earnings
Earnings managed to beat expectations, but followed the fourth quarter’s downtrend. Adjusted earnings per share came in at 80 cents, beating estimates by 17 cents and falling 53% from the fourth quarter of 2018. Despite the down quarter, adjusted earnings for the year gained 35% to $6.64 per share.
Non-GAAP adjustments were a factor in the fourth quarter. Stock-based compensation and legal settlement costs decreased the bottom-line total. For the fourth quarter, earnings per share was adjusted down from 92 cents to 80 cents.
For the year, stock-based compensation and legal settlement costs were also the main adjustments, but with a much less drastic effect. In 2019, the adjusted earnings increased to $6.64 per share from $6.63 with adjusted net income of $4.143 billion and GAAP net income of $4.141 billion. Overall, adjusted earnings per share were 35% higher in 2019.
Key takeaways
Nvidia saw slowing growth in sales and earnings in the last quarter of the year. CEO Jensen Huang acknowledged the disappointing fourth quarter, stating the following:
“This was a turbulent close to what had been a great year. The combination of post-crypto excess channel inventory and recent deteriorating end-market conditions drove a disappointing quarter.”
Estimates for 2020 also indicated that gross margin expectations are lower with operating expenses expected to be slightly lower as well. Overall, the company continues to hold a strong market share in the growing and evolving GPU market as it contends with top competitors Advanced Micro Devices (AMD, Financial) and Intel (INTC, Financial).Â
Stock performance
As of Feb. 18, the company’s stock has a one-year total return of -35% and a three-year annualized return of 84%. Its stock trades on the Nasdaq at approximately $157.
Disclosure: I do not directly own any shares of NVDA.
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