Graphics and mobile chip maker Nvidia (NASDAQ:NVDA) will release its Q4 fiscal 2011 and full year results February 15. As almost 30% of Nvidia’s value comes from professional graphics cards, it will be critical for investors to watch for trends in the professional GPU shipments and how the workstation market is performing. Additionally, as the overall mobile computing market grows, it will be important to keep an eye on how Tegra is performing for the company. Below we discuss our expectations for the upcoming results. Nvidia competes with AMD (NYSE:AMD) in graphics market and with companies such as Qualcomm (NASDAQ:QCOM) in the smartphone and tablet processor markets.
Our price estimate for Nvidia stands at $20.91, implying a 30% premium to the current market price.
GPU Sales To Be Affected By Hard Disk Shortage
The recent earnings release from AMD and a statement by Nvidia reveal that the hard disk shortage has affected GPU sales. AMD reported a decline in its GPU sales in Q4 of 2011 compared to the same quarter a year ago. Nvidia has stated that it earned $116 million lower revenue than expected which was partially due to the hard disk shortage. 
From a long-term perspective, it will be critical to see where Nvidia’s market share is headed and that can be judged by comparing GPU revenue and revenue growth of AMD and Nvidia. The hard disk shortage is likely to continue to impact GPU sales through the first half of 2012 and we expect conditions to improve thereafter.
Growth In Smartphones To Help Tegra Revenues
Global smartphone shipments grew by 55% in Q4 of 2011, totaling 158 million units.  Although this stood below the overall growth of smartphones for 2011, it was significant because now Nvidia has a greater presence in this market and even less growth will mean improved sales.
Nvidia launched its Tegra 3 chip in Q4 of 2011 and that can have some impact, although less, on the results. Nevertheless the company expects to ship about 25 million Tegra processors in 2012, doubling its shipments from 2011. 
Investors should also watch out for any further comments by Nvidia on the future launch of its PC CPUs that are being developed under the name Project Denver. Even a mild success in this business can lift Nvidia’s stock by a notable amount.Notes:
- Nvidia & AMD Say HDD Shortage is Impacting GPU Sales, Tom’s Hardware, Jan 25 2012 [↩]
- Global Smartphone Shipments Jump 55%, Led by Apple’s IPhone, Bloomberg Businessweek, Feb 6 2012 [↩]
- Estimated Brisk Tegra 3 Sales to Benefit Taiwan’s Contract Suppliers, cens.com, Dec 21 2011 [↩]