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Facebook ( FB )-owned Oculus has pledged to release more than 100 virtual reality games by year’s end, a move that will buoy Tesla Motors ( TSLA ) partner Nvidia ( NVDA ), MKM analyst Ian Ing wrote Tuesday as he reiterated a buy rating on shares. Intraday on the stock market today , Nvidia stock jumped 3.2% ahead of the chipmaker’s scheduled fiscal Q4 earnings report. Late Wednesday, Nvidia is expected to report record-breaking sales, but earnings that fall for the first time in two years. For Nvidia’s fiscal Q4, the consensus of 29 analysts model $1.31 billion in sales, up 5% year over year, and 32 cents earnings per share ex items, down 9% vs. the year-earlier quarter. Three months ago, Nvidia guided to $1.3 billion in sales, plus or minus 2%. Analysts view $4.92 billion in sales and $1.05 EPS minus items for Nvidia’s fiscal 2016 — up 5% and down 6%, respectively, vs. fiscal 2015. Nvidia’s Q4 guidance implies a full-year outlook of $4.91 billion in sales. MKM’s Ing expects Nvidia to outperform its peers “in a challenging earnings season.” Other chipmakers have suffered Apple ( AAPL ) fatigue in December and ahead of the weak March quarter. “Nvidia remains our top pick based on strength in its core gaming business (58% of October quarter sales) plus abundant ‘call options’ where GPUs could become the ideal solution in coming years,” Ing wrote in a research report. Tesla, Audi, Volkswagen ( VLKAY ), Honda ( HMC ) and BMW use Nvidia graphics processing units (GPUs), according to a November Canaccord report. Continuing infotainment and autonomous-driver efforts will boost Nvidia, Ing wrote. With the release of the Oculus Rift VR headset in March, Nvidia and rival Advanced Micro Devices ( AMD ) are poised to “leapfrog each other” to supply gamers’ video cards, Ing wrote. The Rift website specifies the Nvidia GTX 970 or AMD R9 290. Pricing trends have been relatively benign lately, Ing wrote. Average sales prices for the GTX 980 and 970 are flat sequentially, with the GTX 960 down 1% quarter over quarter. All three are year-old cards. ASPs for the GTX Titan X are up 7% quarter over quarter with only three SKUs now available. “This suggests that demand is outstripping supply for these cards, which include scientific and academic applications,” Ing wrote. He expects prices to surge as Nvidia refreshes its Pascal series later this year. Ing reiterated a 39 price target on Nvidia stock. He noted that bears are “overly focused” on Nvidia gaming’s high exposure to China — about 40% of gaming sales in August. “Gaming growth is more driven by share gains against traditional entertainment consumption rather than macro,” he wrote. “We note that original equipment manufacturer sales were less than 10% of sales last quarter.” Nvidia stock surged 70% over four months between August and December. But shares have fallen lately, and Nvidia stock is now 24% off its 2015 high of 33.94 achieved Dec. 30. Scalper1 News
Scalper1 News