NVIDIA (NASDAQ:NVDA) is one of those companies that are easy to love. Its motherboard products have given me years of solid service in the homely, jerry-built heaps that I call my computers. Its well-known graphics chips offer smooth, flicker-free performance, helping me avoid getting fragged by my Internet gaming nemeses.
That's why it's tough to see the company taking a bit of a beating over recently released fourth-quarter and full-year 2004 results. It's tougher still because it looks like it might deserve to be taken down a notch. Hurt by weaker-than-expected sales for Microsoft's (NASDAQ:MSFT) Xbox, quarterly revenues were barely up over last year, while net income plunged over 50% to $0.14 per share. That beat the $0.11 analysts had been looking for, but a significant tax benefit helped out, and revenues came in well under expectations.
For the full year, sales were down 4.7% to $1.82 billion and earnings fell 20% to $0.43 per share, even though the firm again benefited from a much lower tax rate.
As opposed to the smooth uphill stock charts put up by some chip makers over the past year, it's been a roller coaster for NVIDIA. The stock more than doubled from February to July, only to get whacked hard back in August when rival ATI Technologies (NASDAQ:ATYT) took a prize, landing the contract to produce the chip for the future Xbox.
Despite that bad news, NVIDIA put together a solid third quarter. Future products, including multi-function imaging chips for PDAs and cell phones, as well as motherboard products for AMD's (NYSE:AMD) new 64-bit CPUs, should take up the slack for the console loss.
So, should investors put their chips on NVIDIA's chips? Management isn't providing fiscal 2005 guidance beyond the normally flattish beginning of the year, but analysts foresee earnings of $0.70 per share. That represents 63% earnings growth, and puts the stock at a forward P/E of around 30. As other Fools have pointed out, NVIDIA never really looks cheap, but given its broad product lines and history of battling back from adversity, this might be as cheap as it gets.
Hash over your NVIDIA opinions in the Fool's discussion board.
Motley Fool contributor Seth Jayson owns plenty of AMD and NVIDIA products, but no shares of any companies mentioned here.
