What Does It Take to Make Nvidia Investors Happy?

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Nvidia Corp. (NASDAQ: NVDA) reported first fiscal quarter 2019 results after markets closed on Thursday. For the quarter the chipmaker reported adjusted diluted earnings per share of $2.05 and $3.21 billion in revenues. In the same period a year ago, Nvidia reported EPS of $0.79 on revenue of $1.94 billion. First-quarter results compare to the consensus estimates for EPS of $1.45 and $2.9 billion in revenue.

Among the quarter’s highlights were a 68% increase in gaming revenue to $1.71 billion, a 71% gain in data center revenue to $701 million, and a 22% gain in professional visualization revenue to $251 million. Revenues from its automotive division rose 4% to $145 million and the chip maker announced in January that it had made deals with Volkswagen and Uber to get into businesses that Nvidia believes will be the future of the driving industry.

CEO Jensen Huang said:

At the heart of our opportunity is the incredible growth of computing demand of AI, just as traditional computing has slowed. The GPU computing approach we have pioneered is ideal for filling this vacuum. And our invention of the Tensor Core GPU has further enhanced our strong position to power the AI era.

For the second fiscal quarter of the fiscal year Nvidia expects revenues of $3.1 billion plus or minus 2%. Gross margins are forecast at 63.5% on a non-GAAP basis, plus or minus 50 basis points. Operating expenses are forecast at $685 million (non-GAAP).

Analysts have forecast second quarter EPS at $1.48 and revenues at $2.95 billion. For the full fiscal year analysts are looking for EPS of $6.26 and revenues of $12.38 billion.

Investors must have been hoping for a boost to Nvidia’s $0.60 annual dividend. That pays a yield of just 0.23%. Nvidia did repurchase $655 million in stock and pay $91 million in dividends during the first quarter and expects to return $1.25 billion to shareholders in fiscal year 2019 in the form of dividends and buybacks. To shareholders that means that after about $270 million more in dividends Nvidia’s buyback total will drop to around $300 million for the rest of the year. The fact that the share price has doubled is yesterday’s news.

The stock closed at an all-time high of $260.50 on Thursday, but shares traded lower after the announcement, down about 1.4% at $257.17. The stock’s 52-week low is $119.91 and the 12-month price target was $250.22 before results were announced.

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