To judge from NVIDIA's
Even less explicable was the 9% haircut NVIDIA endured yesterday, as part of a downturn in the semiconductor industry: Texas Instruments
Yet NVIDIA's third-quarter results were superb. Sales grew 36% year over year, and the margin improvements touted in the press release's headline helped the company translate that sales growth into 121% better profits than it earned a year ago, $0.38 per share in all. Operating margins year to date ran to 19.8%, a 540-basis-point improvement over its performance in the first three quarters of 2006. That puts NVIDIA within spitting distance of Intel, in terms of margins, and way, way, way ahead of unprofitable rival AMD.
As for guidance, well, NVIDIA hardly mentioned it in its earnings release. Instead, management revealed its guidance in the post-earnings conference call -- which few ordinary investors have the time or patience to monitor. Thus, only the professional analysts, who get paid to sit through these things, learned that NVIDIA predicted 5% to 7% sales growth, stable gross margins, and a rise in operating costs from 3% to 5% for the fourth quarter.
Although management didn't specify, I'm guessing it was referring to sequential changes in those percentages. Assuming that's correct, we're looking at about 46.2% gross margins on about $1.2 billion, and about $275 million in operating profits. If it's taxed at the predicted rate, it should give us per-diluted-share profits of about $0.39 per share, a figure that falls in the middle of the analysts' estimated range of $0.32 to $0.48 per share.
Aha! There's the culprit!
Getting back to the question of the day: Why exactly did NVIDIA lose $1.8 billion in market cap yesterday? I think we see a hint in that the one chip stock to rise yesterday was Intel
That's my theory, at least. To learn what the stock investigators at Motley Fool Stock Advisor think about their recommendation's recent performance, pick yourself up a free trial to the service and review our analysts' latest updates.
Intel is an Inside Value selection.