The price of Nvidia stock is rising in pre-market stock trading action this morning after the chipmaker shattered analysts’ forecasts for both revenues and earnings for the second quarter of its 2022 fiscal year.
The Santa Clara-based company reported record revenues of $6.51 billion for the three months ended on 1 August resulting in a 68% jump compared to the same quarter a year ago, with Gaming and Data Center revenue surging 85% and 35% respectively compared to the previous year. Analysts had estimated total revenues of $6.53 billion according to data compiled by Refinitiv.
Notably, the company’s Professional Visualization and OEM segments reported the most significant year-on-year jumps as they advanced 156% and 180% respectively on a year-on-year basis although they still make up for a small portion of Nvidia’s overall top-line results.
Adjusted gross margins for the chipmaker advanced 50 basis points compared to the previous quarter and 70 basis points compared to a year ago at 66.7% while the firm’s operating income experienced a 9% year-on-year jump at $2.44 billion.
Meanwhile, adjusted earnings per share for the second quarter landed at $1.04 or 3 cents above the Street’s estimates for the period while the company’s revenue guidance for the third quarter came in at $6.8 billion or around $270 million above the consensus for this upcoming quarter. The company also forecasted a 30 basis point advance in its adjusted gross margins for the next quarter at 67%.
Finally, NVIDIA (NVDA) announced the payment of a $0.04 dividend to be distributed on September 23, 2021.
How has NVIDIA stock performed so far this year?
Since 2021 started, NVIDIA’s stock price has advanced as much as 46% as the company has benefitted from multiple pandemic-related tailwinds including a surge in gaming, cryptocurrency mining, and data center demand amid an explosion in cloud-based services.
This performance is coming on top of a 127% gain the stock delivered last year and highlights the underlying strength of the business.
Meanwhile, NVIDIA announced recently that it has taken the first steps to participate in the development of the metaverse, an alternative virtual version of reality that promises to be the next frontier for internet companies.
In this regard, Jensen Huang, the founder and Chief Executive of the chipmaker, stated: “We are thrilled to have launched NVIDIA Omniverse, a simulation platform nearly five years in the making that runs physically realistic virtual worlds and connects to other digital platforms”.
He added: “We imagine engineers, designers and even autonomous machines connecting to Omniverse to create digital twins and industrial metaverses”.
What’s next for Nvidia stock?
The latest price action for NVIDIA stock shows a break of a long-dated trend line that emerged back in May. This break is possibly signaling a change in the directional outlook for the stock as even though Nvidia’s results were particularly positive during the second quarter, they may have been fully priced in and now market participants could dump the stock once the cat is out of the bag.
Momentum readings reinforce this bearish view as the MACD has crossed below the signal line – an event that is typically considered a sell signal – while the oscillator posted a pronounced lower high on 5 August despite the stock price advancing near all-time highs.
Moreover, NVIDIA shares have declined for three days in a row and daily trading volumes have been accelerating during that period, which indicates that the selling pressure might be picking up some steam.
Based on these readings, the outlook for NVIDIA shares is bearish with a first support area found at the $180 level for a total downside risk of 5.2%.
Currently, the stock is trading at 47 times its forecasted earnings for the next twelve months. Last year, the firm’s adjusted EPS rose over 50% while analysts are expecting a 58% advance in EPS figures this year followed by subsequent low double-digit jumps in 2022 and 2023.
These future estimates are possibly accounting for a deceleration in the company’s growth rates amid a fading pandemic tailwind and the ultimate resolution of the supply and demand imbalance in the semiconductors market.
However, if some of these tailwinds prove to endure for longer than expected, chances are that the stock could continue to advance to new highs in the following quarters. Moreover, the firm’s participation in the development of the metaverse could open a particularly promising new stream of income that could further fuel its growth in the future.