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Can NVIDIA Turn the Corner? (NVIDIA)

Is NVIDIA (NASDAQ: NVDA) making serious inroads versus Intel (NASDAQ: INTC) in the area of GPU computing? According to some sources, the company may have landed a nice deal with Amazon for over 10,000 Tesla K-10 boards. Amazon apparently bought the units, which sell for as much as $4000, at a discounted price between $1500 and $1800. NVIDIA should receive somewhere in the neighborhood of $16 million from the sale. Additionally, sources claim that Amazon purchased a two-year warranty program, which will generate another $500 per unit annually in revenues for NVIDIA.

GPU computing combines the graphic processing unit with a CPU (central processing unit). NVIDIA created the technology five years ago, and GPU computing has now become the industry standard. For the user, GPU computing allows applications to run faster.

The news did little to bolster share prices today. Buyers started out on an optimistic note as the stock gapped four cents higher on the opening to begin the session at $13.66. Within the first 30 minutes of trading, the stock traded at the high for the day when traders exchanged shares for $13.80. From there, the session was all downhill for NVIDIA stock. With a little over an hour left in the trading week, share prices dropped to an intraday low of $13.25. At the closing bell, the shares ended the day with a loss of over 2% to finish at $13.30.

NVIDIA stock hit annual high of $16.90 in early February, but the company then issued a revenue warning on February 15. Analysts had expected the company to realize revenues of $944 million in the first quarter of 2013, and NVIDIA stated that revenues would fall short of those projections with receipts in the $900 million to $930 million range. Traders took their cue and begin earnestly selling shares all the way through May when they traded shares at an annual low price of $11.63. The stock bounced 25% over the next two months until again the company issued another revenue warning for the third quarter of 2013 on the heels of a second quarter earnings report that beat analysts’ expectations by a nickel. Trader must have thought they were seeing deja vu all over again. Analysts expect the company to earn $0.90 per share for the 2013 fiscal year. Share prices have been at the $13.00 level since the lowered guidance news. Traders have to wonder if revenue misses are going to be a common theme.

This morning, Macquarie reiterated its neutral rating on the stock. Within the last month, several investment and research firms have issued reports and recommendations to clients. Longbow Research, along with Cowen, has also placed a neutral rating on NVIDIA shares. On September 28, Brean Murray initiated coverage on the company with a “hold” recommendation to its clients.

NVIDIA creates graphic chips for use in personal computers. The company has three business segments: Graphic Processing Units, Consumer Products and Professional Solutions. The company offers three GPU brands: Tesla, Quadro and GeForce.

Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email ([email protected]) or his Google+ page (https://plus.google.com/103338576216002376250).

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