NVIDIA (NVDA +1.95%) will release its quarterly report on Thursday, and investors are nervous about what's likely to be another quarter of contraction for the chipmaker. Even as rival Qualcomm (QCOM +1.23%) has successfully used the mobile revolution to grow at a furious pace in recent years, NVIDIA stock remains well below its early 2011 levels, and increasingly, worries about the newest initiatives from Intel (INTC +7.08%) to try to make a serious entry into the mobile space seem to overshadow NVIDIA's own attempts to grow.
NVIDIA has a solid reputation as a graphics specialist, with graphics-processing units arguably representing its biggest area of expertise. But NVIDIA's future hinges on going beyond GPUs to build processors that incorporate the latest wireless technology in order to enhance connectivity. NVIDIA's Tegra line of chips could be the platform on which NVIDIA could live up to its promise, but Qualcomm has done a good job of winning space for its own chips in new mobile devices, while Intel has high hopes for its latest releases. 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 |
$0.20 |
|
Change From Year-Ago EPS |
(39%) |
|
Revenue Estimate |
$1.05 billion |
|
Change From Year-Ago Revenue |
(12.6%) |
|
Earnings Beats in Past 4 Quarters |
4 |
Source: Yahoo! Finance.
Will Intel and Qualcomm crush NVIDIA?
In recent months, analysts have been increasingly cautious about NVIDIA earnings. They've cut their October-quarter estimates by $0.02 per share, and they've reduced their full-year fiscal 2015 projections by $0.03 per share. The stock has largely languished lately, rising less than 1% since early August.
NVIDIA didn't satisfy investors with its second-quarter earnings report back in August. Even though it did better on both revenue and net income than investors had expected, NVIDIA pulled back on its future growth projections. In particular, as the company has made the transition from its Tegra 3 to its Tegra 4 line of processors, NVIDIA isn't sure whether it will be able to sustain revenue at or above year-ago levels, citing "current dynamics in the mobile space" for the uncertain guidance. That's troubling, given Intel's push to try to gain ground on both NVIDIA and Qualcomm.
One reason for NVIDIA's woes came from its decision to focus on its Tegra 4i integrated mobile processor, which is essentially a scaled-down version of the Tegra 4 that NVIDIA could use to offer lower-cost alternatives for smartphones and tablets. That arguably gave Qualcomm the opening it needed to get its chips into the newest version of the Nexus 7 tablet, and it could open the door for Intel to grab some design wins as well.
But NVIDIA hasn't shied away from moving forward on its own on the hardware front. After designing its own Shield mobile-gaming console, NVIDIA has also come out with its own Tegra 4-based tablet. Yet with so much competition among tablet makers trying to aim at the low-priced end of the market, it'll be tough for the Tegra Note tablet to differentiate itself from rival offerings like the lower-priced Kindle Fire and the slightly higher-priced Nexus 7.
NVIDIA got an important success story under its belt from the Xiaomi Mi3 Tegra 4 smartphone, which is a mid-priced offering for the Chinese market. If it performs well, then the phone could validate NVIDIA's Tegra 4 strategy going forward.
In the NVIDIA earnings report, watch to see how the company's graphics-chip business performs. NVIDIA relies on its graphics dominance, and any threat to the segment going forward could be extremely problematic for the company's future.
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