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Will Soft Gaming Business Ail NVIDIA's (NVDA) Q4 Earnings?
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NVIDIA (NVDA - Free Report) has been suffering a dull Gaming segment, which is expected to remain as an overhang in fourth-quarter fiscal 2019 as well. Results of the quarter are scheduled to be released on Feb 14.
The chip-making giant is well known for its high-performance GPUs used by PC gamers. However, the recent slowdown in demand for older and newer gaming chips hit the company badly.
Click here to know how the company’s overall Q4 performance is likely to be.
What’s Impacting the Gaming Business?
NVIDIA’s fate is highly tied to its gaming segment, which remains the largest contributor to its revenues.
In the last reported quarter, although Gaming revenues of $1.76 billion (55% of total revenues) were up 13% on a year-over-year basis, it was much lower than back-to-back growth of more than 50% in the last three reported quarters. Further, the metric dipped 2% sequentially.
NVIDIA was overly optimistic that demand for its GPUs will shift from crypto miners to gamers, which will boost its gaming business revenues and offset the revenue loss from miners. As a result, the company continued with its production of GeForce graphics cards. However, drawing proof from its last result, this has not been the case.
Inventory level of midrange Pascal gaming cards remained higher-than-expected as demand from gamers failed to perk up rapidly to mitigate the tepid cryptocurrency-related requirement. Price of graphic cards, which the company expected to decline with a fall in crypto-related demand, remained elevated and badly hampered shipments.
Consequently, on the last earnings call, management announced that its suspension of mid-range Pascal GPU shipments for stabilizing the channel-inventory levels will hurt Q4 results as the midrange GPUs account for nearly one-third of its gaming revenues.
Moreover, sale of Turing-based GPUs and notebook gaming GPU sales in China, which drove a year-over-year improvement in the last reported quarter is not likely to be the same in the fiscal fourth quarter.
Sluggish consumer demand for gaming GPUs due to weakness in China market is a major headwind to the company in the soon-to-be-reported quarter. Further, slowdown in Tegra-powered Nintendo (NTDOY - Free Report) Switch gaming consoles also poses a threat to its gaming segment.
The Zacks Consensus Estimate for gaming revenues in the fiscal fourth quarter is pegged at $1.26 billion, indicating a year-over-year drop of 27% and a sequential decrease of 29%.
Long-term earnings growth rate for MeetME and Verint is projected at 20% and 10%, respectively.
Zacks' Best Stock-Picking Strategy
It's hard to believe, even for us at Zacks. But from 2000-2018, while the market gained +4.8% per year, our top stock-picking strategy averaged +54.3% per year.
How has that screen done lately? From 2017-2018, it sextupled the market's +15.8% gain with a soaring +98.3% return.
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Will Soft Gaming Business Ail NVIDIA's (NVDA) Q4 Earnings?
NVIDIA (NVDA - Free Report) has been suffering a dull Gaming segment, which is expected to remain as an overhang in fourth-quarter fiscal 2019 as well. Results of the quarter are scheduled to be released on Feb 14.
The chip-making giant is well known for its high-performance GPUs used by PC gamers. However, the recent slowdown in demand for older and newer gaming chips hit the company badly.
Click here to know how the company’s overall Q4 performance is likely to be.
What’s Impacting the Gaming Business?
NVIDIA’s fate is highly tied to its gaming segment, which remains the largest contributor to its revenues.
In the last reported quarter, although Gaming revenues of $1.76 billion (55% of total revenues) were up 13% on a year-over-year basis, it was much lower than back-to-back growth of more than 50% in the last three reported quarters. Further, the metric dipped 2% sequentially.
NVIDIA was overly optimistic that demand for its GPUs will shift from crypto miners to gamers, which will boost its gaming business revenues and offset the revenue loss from miners. As a result, the company continued with its production of GeForce graphics cards. However, drawing proof from its last result, this has not been the case.
Inventory level of midrange Pascal gaming cards remained higher-than-expected as demand from gamers failed to perk up rapidly to mitigate the tepid cryptocurrency-related requirement. Price of graphic cards, which the company expected to decline with a fall in crypto-related demand, remained elevated and badly hampered shipments.
Consequently, on the last earnings call, management announced that its suspension of mid-range Pascal GPU shipments for stabilizing the channel-inventory levels will hurt Q4 results as the midrange GPUs account for nearly one-third of its gaming revenues.
Moreover, sale of Turing-based GPUs and notebook gaming GPU sales in China, which drove a year-over-year improvement in the last reported quarter is not likely to be the same in the fiscal fourth quarter.
Sluggish consumer demand for gaming GPUs due to weakness in China market is a major headwind to the company in the soon-to-be-reported quarter. Further, slowdown in Tegra-powered Nintendo (NTDOY - Free Report) Switch gaming consoles also poses a threat to its gaming segment.
The Zacks Consensus Estimate for gaming revenues in the fiscal fourth quarter is pegged at $1.26 billion, indicating a year-over-year drop of 27% and a sequential decrease of 29%.
NVIDIA Corporation Price and Consensus
NVIDIA Corporation Price and Consensus | NVIDIA Corporation Quote
Zacks Rank and Stocks to Consider
NVIDIA currently carries a Zacks Rank #5 (Strong Sell).
A few better-ranked stocks in the broader technology sector are MeetMe, Inc. and Verint Systems Inc. (VRNT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for MeetME and Verint is projected at 20% and 10%, respectively.
Zacks' Best Stock-Picking Strategy
It's hard to believe, even for us at Zacks. But from 2000-2018, while the market gained +4.8% per year, our top stock-picking strategy averaged +54.3% per year.
How has that screen done lately? From 2017-2018, it sextupled the market's +15.8% gain with a soaring +98.3% return.
Free – See the Stocks It Turned Up for Today >>