Why Nvidia Stock Can Do No Wrong After Q4 Earnings

Nvidia Corp. (NASDAQ: NVDA) reported fiscal 2020 fourth-quarter and full-year results after markets closed on Thursday. For the quarter the chipmaker reported adjusted diluted earnings per share (EPS) of $1.89 and $3.11 billion in revenues. In the same period a year ago, Nvidia reported EPS of $0.80 on revenue of $2.21 billion. Fourth-quarter results compare to the consensus estimates for EPS of $1.67 and $2.97 billion in revenue.

For the full year, the company reported EPS of $5.79 on sales of $10.92 compared to fiscal 2019 EPS of $6.64 and sales of $11.72 billion. Analysts were looking for EPS of $5.58 and sales of $10.78 billion.

In the current (first 2021 fiscal) quarter, Nvidia expects to post revenue of $3 billion (plus or minus 2%). Adjusted gross margins are forecast at 64.5% to 65.9% and adjusted operating expenses are expected to ring in at $835 million. The company did not offer an EPS forecast and the first quarter estimate includes a $100 million downward adjustment to account for potential effects of the coronavirus outbreak.

In the first quarter of the prior fiscal year, Nvidia reported revenues of $2.21 billion and EPS of $0.88. Analysts are looking for first-quarter EPS of $1.52 and revenues of $2.85 billion for the quarter with EPS totaling $7.26 for the full year on revenues of $12.84 billion.

Founder and CEO Jensen Huang said:

Adoption of NVIDIA accelerated computing drove excellent results, with record data center revenue. … And new NVIDIA computing applications in 5G, genomics, robotics and autonomous vehicles enable us to continue important work that has great impact. We are well positioned for the greatest technology trends of our time.

The company now expects to close its $6.9 billion acquisition of Mellanox Technologies “in the early part of calendar 2020.” At the end of last quarter, Nvidia said it will return to buying back stock after it closes the deal. Nvidia will pay its regular cash dividend of $0.16 per share on March 20 to shareholders of record on February 28.

Shares remain richly priced at around 37-times expected earnings and these results promise to keep the music playing.

The stock closed down about 0.7% in Thursday’s regular session at $270.78 and gained about 6.4% in after-hours session trading to around $288.00. The stock’s 52-week trading range is $132.60 to $273.47. The high was set during Thursday’s regular session and promises to rise again on Friday. The 12-month consensus price target on the stock was $257.98 before the results were announced.

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