Nvidia’s dividend growth
Nvidia’s expected annual dividend remains unchanged at $0.60 for fiscal 2019which ends in January 2019. The stock has risen 4% in 2018 to date.
What are the potential challenges to Nvidia’s GPU market share?
Nvidia’s revenue grew 66% to $3.2 billion in the fiscal quarter ended April 29, 2018. Growth was mainly driven by the GPU (graphics processing unit) segment, followed by its Tegra Processor business. The gaming and datacenter markets drove growth, followed by professional visualization, automotive, OEM (original equipment manufacturers), and IP (intellectual property).
Advanced Micro Devices’ (AMD) entry into the GPU segment seems to have an impact on Nvidia’s revenue. Nvidia enjoyed an ~80% revenue share in the server GPU market in 2017, according to an IDC (International Data Corporation) report. Intel tweeted on June 12 about the launch of its discrete GPU in 2020.
What drove EPS growth?
Nvidia’s gross profit grew 80% in the quarter ended April 29. It directs a significant chunk of its revenue to R&D (research and development) and SG&A (selling, general, and administrative) expenses. R&D expenses used 17% of its revenue, and SG&A expenses consumed 7% of its revenue in the quarter ended April 29.
Its operating income grew 134% in the quarter ended April 29. EPS grew 151%, further enhanced by share buybacks. Nvidia has generated enough free cash flow to pay off its dividends in that quarter. It will release its results for the quarter ended July 29 on August 16.
Projected revenue, EPS, and valuations
Nvidia has projected revenue of $13.1 billion, $14.7 billion, and $18.1 billion for fiscal 2019, 2020, and 2021, respectively. Its projected EPS is $7.30, $7.80, and $9.90, respectively, for those same years. Lower price gains and decent EPS growth have translated to projected PE ratios of 35.4x, 32.8x, and 26.1x, respectively, for those years.
In the next part, we’ll look at Qualcomm (QCOM).