Nvidia exceeds previous earnings estimates for AI success

On February 13, after the market closed, Nvidia Corp. (NASDAQ: NVDA) released its fourth quarter and full fiscal 2020 results.

The company reported adjusted earnings per share of $ 1.89 (up 136.25% year over year) and sales of $ 3.11 billion (up 40.72% year over year). Net income increased 67.55% to $ 950 million. These numbers far exceed analysts’ expectations of $ 2.97 billion in revenue and earnings per share of $ 1.67.

Nvidia is a technology company based in Santa Clara, California that develops graphics processors (for video games, marketing, etc.) and system-on-a-chip units (for mobile computing, automotive, etc.). It is the company that triggered the growth of the PC gaming market in 1999. More recently, it has developed the GPU-accelerated deep learning framework for applications with artificial intelligence.

Nvidia’s shares traded at $ 270.58 on February 13 for a market capitalization of $ 174.22 billion and a price-earnings ratio of 69.45. The stock rose 6.38% in after-hours trading, but closed slightly.

The company has a GuruFocus financial strength of 8 out of 10 and a profitability value of 9 out of 10. The Peter Lynch chart shows that the stock is overvalued.



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Below is a graph of Nvidia’s quarterly sales and earnings performance, showing that the company is on the verge of recovering to pre-2019 levels.



Factors such as a decline in the PC gaming market and the US-China trade war have had a significant impact on Nvidia’s earnings in 2019. However, the new growth is being driven by data centers, which use their hardware for artificial intelligence calculations and state-of-the-art graphics, innovations that simulate the real-time behavior of light.

“The introduction of NVIDIA Accelerated Computing led to excellent results with record sales in the data center. Our initiatives have been very successful,” said founder and CEO Jensen Huang at the results call. Data center revenue increased 42.56% quarter-on-quarter to $ 958 million.

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Nvidia has slightly lowered its guidance for the first quarter of the 2021 financial year given the new outbreak of coronavirus in China, which is expected to limit sales of its products in the region. The company now anticipates sales of $ 3 billion, a 2% decrease from the previous quarter.

Disclosure: The author has no shares in the named shares.

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