Tesla Demand Drove NVIDIA's Q1 Beat, Q2 Outlook

Pacific Crest says strong demand from Tesla Motors Inc TSLA led NVIDIA Corporation NVDA to post solid quarterly results and guidance. Driven by a strong demand from datacenter and auto markets, the company's first quarter GAAP EPS of $0.33 was a penny better than the Street and Pacific Crest's $0.30. The $1.3 billion revenue also surpassed consensus estimate of $1.27 billion and Pacific Crest's $1.26 billion. Analyst Michael McConnell said the results were benefited from "strong data center sales (Tesla and GRID, +47 percent q/q), driven by deep learning projects at hyperscale customers." NVIDIA guided second quarter sales to $1.35 billion, or up 3 percent q/q, above analyst's estimate of $1.24 billion (-2 percent q/q) and the Street's $1.28 billion (+1 percent q/q). In addition, the company's gross-margin guidance of 57.7 percent was above analyst estimate of 56.9 percent and the Street's 57.1 percent, equating to EPS of $0.37, above analyst estimate of $0.26 and the Street's $0.32. Nvidia sees sequential growth in second quarter in all business segments, including gaming on the strength of new Pascal cards and "Founders Edition" board product, which the analyst says is offsetting weak unit sales forecasts at channel partners. The analyst has raised his estimate for the second quarter EPS/revenue to $0.36/$1.35 billion from $0.26/$1.24 billion. The full year estimate is also raised to $1.57/$5.62 billion from $1.38/$5.36 bilion. However, the analyst maintains a Sector Weight rating on the stock saying "NVDA trades near a five-year peak EV/sales multiple of 3.2x, so further outperformance should hinge on operating-margin expansion." "Gaming GPU TAM growth from VR and Tesla GPU accelerators could be tailwinds, but peaking PC GPU unit share versus AMD and the loss of Intel royalties appear to be offsets," McConnell added. Shares of Nvidia rose 13.56 percent to $40.40.