Please ensure Javascript is enabled for purposes of website accessibility

Why NVIDIA Corporation Jumped on Thursday

By Anders Bylund – Feb 18, 2016 at 11:19AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The unpredictable Tegra line came up big in the fourth quarter, helping the processor veteran beat its own sales targets.

Source: NVIDIA.

What: Shares of NVIDIA (NVDA -0.36%) jumped as much as 12% higher on Thursday morning. The designer of graphics processors, mobile chips, and enterprise number crunchers reported fourth-quarter results on Wednesday night, and the company beat its own guidance on several levels.

So what: Three months ago, NVIDIA's management set a fourth-quarter revenue target at $1.3 billion. Adjusted gross margins were seen near 57%.

Instead, sales rushed 12% higher year over year to land at $1.4 billion. Adjusted gross margins stopped at 57.2% -- a smaller surprise than the large revenue beat, but still a positive sign.

On the bottom line, GAAP earnings held steady year over year at $0.35 per diluted share, but adjusted earnings rose 21% to $0.52 per share. The difference was largely explained by backing out a greater amount of stock-based compensation expenses and a restructuring expense related to the recently halted Icera operation. Icera was once NVIDIA's largest buyout, but the mobile data modems never took off the way NVIDIA had hoped.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Now what: To make up for the iced Icera division, all four of NVIDIA's remaining business segments reported positive sales growth.

The Tegra product line, once intended for smartphones and tablets, is making quick inroads into the booming automotive computing market. Automotive sales rose 68% from the year-ago quarter, followed by 21% higher sales of gaming-oriented graphics processors.

That being said, Tegra sales remain lumpy and actually fell 3% in fiscal year 2015, compared to the 2014 tally. It's also a far smaller operation than NVIDIA's graphics specialty, which pulled in full-year sales of $4.2 billion versus Tegra's $559 million.

"NVIDIA is at the center of four exciting growth opportunities -- PC gaming, VR, deep learning, and self-driving cars," said NVIDIA CEO Jen-Hsun Huang in a press statement. "Our strategy is to create specialized accelerated computing platforms for large growth markets that demand the 10x boost in performance we offer."

After this quick boost, NVIDIA shares have gained more than 30% over the last six months, but still trade well below the multi-year highs that were set to $34 in late December.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$125.16 (-0.36%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.