Gearing up for a big earnings night, featuring two tech companies in our portfolio

Nvidia CEO Jensen Huang wears his usual leather jacket.

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We are preparing for a big night of corporate earnings. Cisco Systems (CSCO) and Nvidia (NVDA), two stocks we own at the Charitable Trust, are due to report their quarterly numbers after the closing bell.

Cisco Systems

Cisco is a cheap tech stock that trades at a mid-teens price-to-earnings multiple with a healthy dividend yield of about 2.60%. The market usually applies this type of discount to slow growers who have limited opportunities to expand margins, but this Cisco is very different from the ones that have been around in years past.

Under the excellent leadership of CEO Chuck Robbins, Cisco has shifted the focus of its business model from stacked hardware sales to higher-margin, more predictable, subscription-based, recurring, and deferred revenue streams. On tonight’s call, we’ll pay close attention to how this transition is progressing and listen closely to how hybrid business is driving the recovery in enterprise spending as well as additional opportunities in 5G, security and cloud.

nvidia

Nvidia is a little trickier because the stock is already one of the top performers in the Nasdaq 100 with shares more than doubling overall so far. This degree of superior performance sets expectations high as print date approaches. However, we think Nvidia is doing very well at the moment. One reason for this view is what we’ve heard from competitor Advanced Micro Devices and the big numbers the data center division published in its quarterly release. AMD invoked pricing power on the Instinct data center GPU line.

On the consumer front, recent NPD data shows that the game adoption we’ve seen during the pandemic has had such traction as “October 2021 consumer spending on video game consoles, content, and accessories increased 16% versus YA, hitting a record October of $4.4 billion.” Consumer spending in history has reached $46.7 billion, up 12% compared to the same period in 2020.

In terms of organizations, we’re looking forward to learning more about the Omniverse, which TIME called “one of the 100 Best Inventions of 2021.” With Nvidia’s Omniverse generally available and the rapid growth of a broader set of software offerings, we’ll be on the lookout for more software feedback that can provide deeper insights into the growth of recurring revenue streams. All in all, as mentioned above, expectations are high in print, so expect plenty of focus on insightful, forward-looking guidance and commentary from Visual CEO Jensen Huang. Conference call comments are a must read.

We’ll provide in-depth analysis in both quarters after they report tonight.

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(Jim Cramer’s Charitable Trust is a CSCO, NVDA tall.)

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