Analyst Brian Alger says the first quarter was very solid, and the chipmaker's light revenues were due entirely to sale of Xbox, for which Nvidia makes graphics chips. He says this indicates Xbox inventories likely have been reduced; he expects a healthy ramp for the rest of fiscal 2004 (Jan). He also thinks Nvidia's impressive core and PC-related business grew.
Alger says Nvidia's business model is transitioning to higher gross margins. He notes second-quarter revenue guidance is calling for growth, vs. lackluster guidance from the rest of the technology sector. Alger raised his 64 cents fiscal 2004 earnings per share estimate to 72 cents, and is raising the 74 cents fiscal 2005 estimate to 80 cents, for which he sees upside.
Alger thinks the stock price will continue to run up into the mid $20s. He is keeping his overweight rating.