Nvidia Stock Surges On Q3 Earnings Beat, Metaverse Revenue Prospects

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Nvidia Corp.  (NVDA) – Get NVIDIA Corporation Report shares surged higher in pre-market trading after the chipmaker posted stronger-than-expected third quarter earnings and both gave an upbeat near-term outlook and a bullish take on developing opportunities in the so-called ‘metaverse’.

Nvidia beat the Street by 6 cents with a third quarter bottom line of $1.17 per share, powered by a 50% year-on-year surge in overall revenues, to $7.1 billion, with stronger-than-expected tallies for both its gaming and data center divisions.

Datacenter revenues, which are around 41% of Nivida’s overall total, rose 55% to $2.94 billion, while gaming was up 42% to $3.22 billion, while crypto mining added a small $105 million boost. 

Looking into the final months of the year, Nvidia forecast revenues in the range of $7.2 billion, plus or minus 2%, while adding that its new Omniverse set of augmented reality software tools — which support designers in the burgeoning ‘metaverse’ — will eventually draw $1,000 a year from 40 million creators.

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“But don’t forget that intelligent use or intelligent users that have been connected through Omniverse will likely be much larger as digital buyers than humans,” said CEO Jensen Huang. “So I mentioned 40 million, but there are 100 million cars. And these 100 million cars will have the capability to have something like in Omniverse Avatar and so those 100 million cars could be $1,000 per car per year.”

“And then of course behind all of that, call it a couple of hundred million digital agents, intelligent agents, some of them humans, some of them robots, some of them Avatars adds $1,000 per agent per year,” he added. “Behind it are NVIDIA GPUs in Omniverse servers.”

Nvidia shares were marked 6.4% higher in pre-market trading to indicate an opening bell price of $311.30 each, a move that would extend the stock’s six-month gain to around 122%.

“Nvidia expects its Omniverse platform to start contributing revenues over the next few years, with examples that range from the existing network of developers building digital twins, to avatars in the hospitality industry,” said BMO Capital Markets analyst Ambrish Srivastava, who carries a $375 price target with an outperform rating on the stock.

“Meanwhile, visibility into the hyperscale market is better than ever, as Nvidia expects a big 2022, while flexing its balance sheet to secure supply as evidenced by the large increase (y/y & q/q) in its outstanding inventory purchase/LT supply obligation.”