NVDA analysis

Here are some data, my analysis and my opinion on NVDA:

NVDA Revenue (M$) Quarterly Y2Y increase

2005 2006 2007 2006 2007

Q1 583.8 681.8 844.3 16.79% 23.83%
Q2 574.8 687.5 935.3 19.61% 36.04%
Q3 583.4 820.6 ???? 40.66%
Q4 633.6 878.9 38.72%

Q2Q increase
Q1 7.61% -3.94%
Q2 -1.54% 0.84% 10.78%
Q3 1.50% 19.36%
Q4 8.60% 7.10%

INTC revenue Quarterly Y2Y increase
2005 2006 2007 2006 2007

Q1 9434 8940 8852 -5.24% -0.98%
Q2 9231 8009 8680 -13.24% 8.38%
Q3 9960 8739 10090 -12.26% 15.46%
Q4 10201 9694 -4.97%

Q2Q increase
Q1 -12.36% -8.69%
Q2 -2.15% -10.41% -1.94%
Q3 7.90% 9.11% 16.24%
Q4 2.42% 10.93%


AMD revenue Quarterly Y2Y increase
2005 2006 2007 2006 2007

Q1 1226 1332 1233 8.65% -7.43%
Q2 1259 1216 1378 -3.42% 13.32%
Q3 1522 1238 1632 -18.66% 31.83%
Q4 1838 1772 -3.59%

Q2Q increase
Q1 -27.53% -30.42%
Q2 2.69% -8.71% 11.76%
Q3 20.89% 1.81% 18.43%
Q4 20.76% 43.13%

My conclusion 1: The PC market is reviving. From INTC and AMD data, Q307 is surprisingly good. INTC and AMD Q307/Q306 are 15.46% and 31.83%, Q307/Q207 are 16.24% and 18.43%, Q307 beating all the past 10 quarters.
My conclusion 2: NVDA Q3 revenue estimated $949M to 1116M, and 1116M is more likely. 949 is based on NVDA Q305/Q205 (1.5%), 1116 is based on Q306/Q206 (19.36). From INTC and AMD Q307/Q207 data (16.24% and 18.43%) and the fact that NVDA outperformed INTC and AMD in the past 10 quarters, $1116M is more possible.

More data to support the above two conclusions: MSFT windows sales Q307/Q306 : 25%. AAPL iMac sales (M, not M$), Q207 1.76M, 33% increase, Q307 2.20M, 34% increase. AAPL has exclusive contract with NVDA (heard, not proved yet).

Here are some data from finance.yahoo. These data are there before the INTC, AAPL, AMD, and MSFT ER since when the fundamentals have been changed so far.

Revenue Estimated
Avg. Estimate 1.00B
No. of Analysts 22
Low Estimate 990.00M
High Estimate 1.05B
Year Ago Sales 820.57M
Sales Growth (year/est) 22.4%

My conclusion 3: NVDA will have good sales and profit margin because they are in China and Asia

Here are NVDA\'s sales by region. It can be seen that the growth of NVDA\'s sales is mainly from Asia (China, Taiwan and Japan). From Q206 to Q207, among 248M revenue increase, 206M is from China. I heard in 2007, a lot of people in mainland China bought computers for trading stocks. The PC sales in China will not be bad (I am collecting data fromLenovo, Acer and Dell\'s sales in China now, not done yet. Maybe somebody on these board can provide some. Thanks in advance).

Q207 Q107 Q306 Q206 Q106 Q305
United States 72,524 101,866 81,490 79,155 77,372 51,511
Other Americas 36,592 54,544 28,696 36,910 27,590 6,660
China 297,458 238,285 158,478 91,459 179,720 102,251
Taiwan 316,974 272,983 348,600 289,406 227,574 323,272
Other Asia Pacific 122,387 95,052 129,866 113,738 111,218 69,037
Europe 89,318 81,550 73,442 76,851 58,333 30,684
Total revenue 935,253 844,280 820,572 687,519 681,807 583,415


My conclusion 4: AmTech and Motley Fool\'s recent analysis is not new and is not so significant.

Please refer to AmTech\'s newest downgrade and history recommendation prices if you are interested. The key argument from Dough is very concerned about the competitive landscape into 2008. He cited potentially stiffer competition from rival ATI and Intel in the future. This competition issue is not new. Everybody knows it. In addition, this is a growing market and they have the chance to grow together. There is no doubt that NVDA is the leader now. Motley Fool supported AmTech by arguing NVDA\'s PEG 2.0 is too high. I strongly disagree this is big reason. NVDA\'s current PE is 35.76. The 2007, 2008, 2009 and next five year PEG will be 0.67, 0.71, 2.06 and 1.63 from MSN data and finance.yahoo provides a PEG of 1.46. The PEG2.0 is the most pessimistic estimation. In addition, except Dough knowing some insiders of NVDA and NVDA\'s management wants to leak some information, I don\'t think one or two person\'s opinion changes the fundamentals much. I heard some analysts have good relationship with MMs. Let\'s see if this is the case for this time.

FYI, the graphics sales from AMT (ATI\'s share), Q207 and Q307 are 195M and 252M. I don\'t think ALL of their growth is because of the market share loss of NVDA\'s. But this number strengthens the sign of a growing market.

My conclusion 5: My price target of NVDA $38~$53

Here is the analysts\' target from finance.yahoo before this ER season. But the fundamentals have been changed since then. (NVDA\'s price reached around $40 after INTC\'s ER).
PRICE TARGET SUMMARY
Mean Target: 38.44
Median Target: 38.50
High Target: 53.00
Low Target: 30.00
No. of Brokers: 18

$34 is a very strong support. $34 is the price when NVDA was split in early Sept. $34 is the 50-day EMA. $34 is the price at which people believe in AmTech\'s downgrade - Q2 2007 is the top growth of NVDA\'s revenue, the worst situation.

Since NVDA has continuously beat estimates in the past 11 quarters, I strongly doubt that NVDA\'s will miss analysts\' estimate this time. If their earning is just inline with estimates, the price will stay among 36~38, the 20-day EMA. If it beats (most likely), 38 is minimum. If it give us a big surprise like MSFT, $40 to 50 is possible. So I believe there is play on NVDA at its current $34.

Please attack my arguments, provide more information I might miss and let\'s have discussions.

I have loaded NVDA when it was at $36, $35 and $34. My MONEY, MY DECISION. Please don\'t take action only based on my analysis. YOUR MONEY, YOUR DECISION.

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