Earnings season is bringing out the best in some surprising places. Two surprises have been Cisco Systems, Inc. (CSCO) & Nvidia (NVDA), both of which have shown strong Q4 numbers, allowing them to buck the trend presently dominating the markets.
In the case of Cisco Systems, Inc. (CSCO), it was a matter of Wall Street love as analysts have been swooning over the stock. The expectation is that the company will be able to deliver a massive earnings report similar to the one delivered on Valentine’s Day 2017. Along with an expected boost from Trump’s tax regime, CSCO is expected to report earnings per share of 59 cents based on expected earnings of $11.8B. In terms of growth, the expected figures represent 3.5% and 1.9% growth respectively. This is a big projection for stock that hasn’t always been a favorite of analysts. CSCO, like Microsoft and Apple, is expected to benefit massively from the new tax package and the prospect of repatriated cash. Much of the momentum that has caused the bullish forecast of CSCO’s earnings is expected to come over into 2018. CSCO bullish expected performance is also a good sign for the tech sector that has taken a few hits over the last two years. A strong underlying infrastructure player like CSCO, when it does well, is a big boost for tech overall.
Analysts were worried that Nvidia (NVDA)’s fourth quarter earnings would take a hit thanks in large part to its presence in the cryptocurrency space. But NVDA’s involvement has been proven to be minuscule; this has led to very favorable numbers coming from the company’s core, and established business divisions. Analysts were bullish and NVDA didn’t disappoint, delivering better than expected numbers all around. The company’s data center division was projected to grow 20% or more; NVDA beat expectations by coming in at 21%. One of the biggest surprises was NVDA’s gaming division growth; analysts were expecting growth of between 5-6% but the company actually delivered 11.4% growth. Gross margins were expected to come in at or above 60% and NVDA didn’t disappoint; the company managed to post gross margins of 62.1%. The very strong numbers gave the stock a boost in trading on Friday. NVDA closed the day’s session up 6.69% or +$14.56. With some analysts setting price targets as high as $280, NVDA is showing very bullish upside from current levels.
The performance of these two tech giants bodes well for the tech sector and the NASDAQ as well. Investors will be no doubt watching to see how things develop for the rest of 2018.