For the firm's second quarter, Nvidia (NVDA) posted adjusted EPS of $1.04, GAAP EPS of $0.94, and revenue generation of $6.51 billion. All three metrics present as comfortable beats of expectations. What it boils down to is 89% earnings growth on 68.2% revenue growth. This was the seventh consecutive quarter that Nvidia achieved sales growth of 39% or more.
Readers know that I draw the line for what is a growth stock and what is not... at a rough 40%. Nvidia, even after all this time, and at a market cap of $475 billion, is still a growth stock and that growth is still accelerating despite shortages across the industry. So, Nvidia drove record total revenue on record gaming revenue and record data center revenue.
It gets better. Gross margin improved 600 basis points year over year and 60 bps q/q to 64.8%. Operating Income screamed 275% higher annually and 25% sequentially to $2.444 billion. Net income jacked 282% from a year ago, and 24% from a quarter ago to $2.374 billion. Operating expenses increased but not like sales. Operating expenses were up 22% y/y and 6% q./q. Stunning. Let's pop the hood and have a look.
Segment Performance
Gaming remains the firm's largest business. Gaming contributed $3.061 billion to the pie, up 85% and above consensus. The driver here is the GeForce GPUs. The firm also had the foresight to design a specialized cryptocurrency mining processor that can not be repurposed so as to put a halt to the cannibalization of sales between business lines.
The Data Center is again, a tremendous driver. The Data Center posted sales of $2.366 billion, up 35%, and also above consensus. Remember, this now includes the Mellanox acquisition as it did in Q1. Professional Visualization put together sales of $519 million over the three month period, up 156%, and also a beat of expectations. Nvidia will be a key player as a number of other "tech" firms put together the "Metaverse" which is being described as an internet that you access through an avatar live and move in, rather than look at.
Automotive missed Wall Street's expectations, but still managed growth of 37% to contribute $152 million in revenue. OEM & Other also fell short of Wall Street, but managed fairly gaudy growth of 180% to $409 million.
Outlook
For the current quarter, Revenue is now projected at $6.8 billion (+/-2%), well above the $6.53 billion that Wall Street was looking for. That number, if realized... would be good for growth of 43.9%. GAAP and non-GAAP gross margin is expected to hit 65.2% and 67%, up from 58.8% and 66%, respectively, from Q3 2020.
Dangerous Chart
There is a lot to see here. Relative strength is neutral. The Full Stochastics Oscillator says NVDA is technically oversold. The daily MACD looks fairly awful. On the bright side, the shares seem to have found Fibonacci support in early July and have gone on to form what looks to be an incomplete cup with handle pattern.
Unless... that's not a handle.
If the shares keep going lower, then we do not have a cup with handle, we would then have a "double top" reversal, which would be bearish. I re-initiated the name with a long position going into last night's earnings report. For me, the 50 day SMA is key. Currently that line stands at $194, and the shares a touch below that, but we can not yet say that the level has broken. I'll add down to the low $180's, but we hit the high $170's and I have to start thinking that I was early. If this is a cup and not a double top, then the pivot is $207, producing a target price of $250. First things first. First, that 50 day line.
(Nvidia is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA? Learn more now.)
