Brean Adjusts NVIDIA's Fair Value Range To $35-$40

NVIDIA Corporation NVDA reported robust April quarter results with the revenue beating the consensus and the guidance.

Brean Capital’s Mike Burton reiterated a Hold rating on the company, while adjusting the fair value range to $35-$40.

“The Company continues to execute well and has growth drivers / levers in Tegra and GPUs and more importantly, is expecting a resumption of growth from its Gaming business driven by its Pascal-based GeForce products in Jul-16Q,” Burton mentioned.

Beat Quarter

NVIDIA reported revenues of $1.31 billion, representing a 7 percent sequential decline, ahead of the guidance of a 10 percent decline.

The analyst explained that the “better-than-expected revenue decline was driven by the company’s Datacenter business,” which grew 47 percent quarter on quarter, driven by strength in artificial intelligence and deep learning applications.

Management also attributed the better than expected decline to the 22 percent quarter on quarter growth in the Automotive business, driven by Tegra products.

Offsetting these positive trends, NVIDIA reported a 15 percent decline in its Gaming business, as well as a 7 percent decline in Professional Virtualization.

Non-GAAP gross margins beat the consensus, rising sequentially due to a better product mix. The results translated into GAAP EPS in-line with the consensus.

July Quarter Guidance

NVIDIA guided to above consensus revenue for the July quarter, at $1.35 billion or a 3 percent quarter on quarter increase.

“For the Jul-16Q, the company expects growth across many of its business segments, and we believe it is already beginning to enjoy the ramp of its new GeForce Gaming product line using the Pascal architecture,” the analyst stated.

Gross margins were guided to a robust 58 percent, which is likely to be sustained into 2H, as the Gaming business ramps.