How NVIDIA Hopes to Reignite Its Growth

On Thursday, NVIDIA (NASDAQ: NVDA  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

The mobile-device space has given chip makers like NVIDIA huge potential for growth, but fierce competition throughout the industry has created winners and losers in each market niche within the sector. Let's take an early look at what's been happening with NVIDIA over the past quarter and what we're likely to see in its report.

Stats on NVIDIA

Analyst EPS Estimate

$0.10

Change From Year-Ago EPS

0%

Revenue Estimate

$940.54 million

Change From Year-Ago Revenue

1.7%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Why are expectations for NVIDIA's earnings lower?
Analysts have dramatically downgraded their view on NVIDIA's earnings in recent months, cutting their first-quarter estimates by more than half and slashing more than $0.25 per share from their full-year fiscal 2014 expectations. Yet the stock has performed well, rising 13% since the end of January.

One reason for the stock's success may be that NVIDIA has come out with several promising products. The company unveiled its Tegra 4i mobile chip in February, which offers integrated LTE-network capability and could help NVIDIA move more dramatically into the smartphone space. Archrival Qualcomm's (NASDAQ: QCOM  ) Snapdragon 800, which is the closest competitor to the Tegra 4i, is more than twice its size, according to NVIDIA. It'll likely take until the end of the year for devices using the Tegra 4i to come to market, but NVIDIA stands to challenge Qualcomm's traditional dominance of smartphones as a result. Moreover, the company will use a Tegra 4 processor for its Project Shield portable gaming device, which will show off NVIDIA's traditional graphics dominance as well as providing an ecosystem for showing gaming and streamed-programming content on HDTVs.

Yet NVIDIA still faces the structural challenge of having some of its most lucrative potential markets closed off to it. Although NVIDIA has done a great job of tapping the tablet market, including the Nexus and Surface RT lines, best-sellers like the iPad and Galaxy Tab are off-limits to the company because their makers keep processor-design in-house. Rumors that Qualcomm has captured the next-generation Nexus 7 processor spot from NVIDIA are also troubling.

Moreover, other competitors aren't standing still, either. Broadcom (NASDAQ: BRCM  ) recently came out with a discrete LTE chip that it claims is smaller than any other on the market. That will give device makers the choice of whether they prefer integrated or discrete LTE functionality, and Broadcom's hoping to keep a share of the market even in the face of NVIDIA's advances.

In NVIDIA's quarterly report, watch for news about device-maker adoption of the Tegra 4i as well as confirmation about the Nexus 7. NVIDIA has a lot of potential, but the company needs things to go right in order to make the most of the opportunity.

NVIDIA was ahead of the curve launching its mobile Tegra processor, but investing gains haven't followed as expected, with the company struggling to gain momentum in the smartphone market. The Motley Fool's brand-new premium report examines NVIDIA's stumbling blocks, but also homes in on opportunities that many investors are overlooking. We'll help you sort fact from fiction to determine whether NVIDIA is a buy at today's prices. Simply click here now to unlock your copy of this comprehensive report.

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Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 07, 2013, at 7:57 PM, systemBuilder wrote:

    The Intel HD 4600 graphics core and HD 5200 and 5250 cores in next-generation Haswell processors will likely bankrupt all players making low-cost graphics cards (costing less than $150). Nvidia needs to get a permanent toe-hold in the mobile market right away, because it faces extinction in the PC market, from Intel, very soon.

  • Report this Comment On May 07, 2013, at 11:56 PM, jwtrotter wrote:

    Ok, you come back when this happens systembuilder and let us all know okay? It's not happening anytime soon, just has been the case for the last several years. And you really don't get the business model if you think sub $150 is really a concern in discrete graphics.

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