NVDA ($25~$21.50~$23)
thestreet.com
Sales Slip, Stock Follows
By K.C. Swanson
TheStreet.com Staff Reporter
2/12/2004 7:50 PM EST
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Updated from 5:00 p.m. EST
Graphics chipmaker Nvidia (NVDA:Nasdaq - commentary - research) stumbled in its fiscal fourth quarter, confessing to a sales shortfall after Thursday's close and forecasting revenue below consensus estimates for the current quarter. Though it beat Wall Street estimates for earnings, investors focused on the downside and promptly knocked 7% off the shares.
After hours, Nvidia lost $1.68 to $21.84. In regular trading Thursday, the stock closed down 73 cents, or 3%, to $23.52.
"My initial takeaway is that they traded off because revenues were disappointing," said Erach Desai, an analyst at American Technology Research. "But the miss was entirely in Xbox and the core graphics business was up 20% sequentially, better than I was looking for."
Nvidia said all its core product areas -- including laptops, desktops and workstations -- saw growth.
"Nvidia had some manufacturing problems with key high-volume parts, but all that is apparently behind them and what you want to look at is where things are going," said Desai, who has a buy rating on the stock. His firm doesn't have any investment banking relations with the company.
Notwithstanding tough competition from rival ATI (ATYT:Nasdaq - commentary - research), "I think if there's a robust PC cycle, both [Nvidia and ATI] will do well, and meanwhile Intel (INTC:Nasdaq - commentary - research) will be more focused on processors rather than integrated graphics chipsets," Desai added. "That would mean good things for both Nvidia and ATI."
In its fourth quarter of fiscal year 2004, ending Jan. 25, Nvidia's sales totaled $472.1 million, about flat with last year's levels and below analyst expectations for $482.3 million.
Net income of $24.2 million fell 52% from last year's levels. But on a per-share basis, earnings of 14 cents were 3 pennies above expectations.
In the upcoming quarter, Nvidia guided for revenues to be flat to down 5%.
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