Nvidia: Reasons To Be Bullish?

3:31 pm ET, 08 Feb 2018

Today after market close, Nvidia (NASDAQ: NVDA) is set to report its earnings for the fiscal quarter ending January 2018.  According to Finstead Research, Nvidia price target upside is -5.47% (visit Finstead and type "NVDA upside"). 

However, there are some fundamental reasons why investors are bullish about Nvidia.  

Nvidia has an opportunity to license its technology and accelerate its IP adoption in the mobile market.

Nvidia’s high-functionality gaming device priced affordably is a great growth avenue.  NVIDIA SHIELD Android TV device and GeForce NOW let users stream video games from the cloud.  The Company has plans to introduce an LTE version in its forthcoming versions of the gaming products.

Nvidia is generating more increasingly more revenue through advanced graphics cards such as GeForce GTX 750, GeForce GTX 800M, and GeForce GTX 980.

Tesla P100 GPU Accelerator uses High-Performance Computing (HPC) technology that can reduce operational costs by 70%. Similarly, Tesla M10 GPU can minimize the costs per user as it is capable of connecting 64 users per board, or up to 128 users per server using only 2 boards.

Products such as BFGD for an enhanced gaming experience, Jetson TK1 for robotics, Tegra K1 processor, and DGX-1 supercomputer customized for profound learning are all potentially great future growth opportunities for Nvidia.  Its consistent efforts in bringing in newer technologies are evident from the development of CES (computer vision system), DRIVE PX 2 (a powerful engine for AI used in vehicles), and Xavier (an AI supercomputer chip).

Nvidia's partnership with Baidu to use AI in cloud computing, self -driving vehicles and home assistance will encourage new product development and provide a great boost to the autonomous vehicle market.

The partnership between NVIDIA and VMware would let NVIDIA GRID technology run on the VMware Horizon Desktop-as-a-Service (DaaS) Platform to enhance its virtualization, automation, and cloud-based portfolios.  The GPU-based NVIDIA GRID software platform will be available on 50 server platforms. 

Over the last year, NVDA returned +92.30%.  This return is higher than Semiconductor industry (24.89%), Technology sector (16.05%), and S&P 500 (15.52%) returns.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finny Bites, please send us an email at hi@askfinny.com.

NVIDIA Corporation (NVDA) Buy or Sell Stock Guide

Updated at: 12:02 am ET, 24 Mar 2020

Are you looking for the analysis of NVIDIA Corporation (NVDA) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 14 reasons to buy and 5 reasons to sell NVDA stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about NVDA stock:

  • Is NVDA a buy or a sell?
  • Should I sell or hold NVDA stock today?
  • Is NVDA a good buy / investment?
  • What are NVDA analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy NVDA stock:

1. Deep learning and artificial intelligence computing that rely on Nvidia's graphics chips present the firm with a potentially massive growth opportunity.

2. The firm has an increasingly stronger presence in the automotive segment, via infotainment systems and autonomous driving in the longer term, which should help diversify its revenue sources.

3. The increasing complexity of graphics processors provides a barrier to entry for most potential rivals, as it would be difficult to match Nvidia's large R&D budget.

4. NVIDIA has decided to license its graphics IP, which should generate strong revenues. Selling its own powerful and expensive chips is going to get more and more difficult, with alternatives from Qualcomm, ARM and Intel entering the market. If, however, it starts licensing the technology, it would be able to shift the manufacturing cost to licensees and also accelerate the adoption of its IP in the high-growth mobile markets.

5. The company’s shield gaming device is another growth avenue. Based on Android Jelly Bean, this handheld gaming device features a flip-up 5-inch touchscreen display, two analog joysticks, a control pad and buttons. Bluetooth peer-to-peer or WiFi communication is an added bonus.

6. The company is in the process of gaining market share among gaming service providers, thereby strengthening its position in the workstation-based gaming services in supercomputing segments. The advanced gaming cards also add value to PC manufacturers.

7. Although gaming is the key to NVIDIA’s growth, computing is becoming increasingly more visual, given the new-age tablets that are seeing tremendous demand. Software increasingly relies on a visual user interface rather than text. For example, Windows 8 requires much more GPU resources than its predecessor as it leverages improved graphics capabilities to enhance user experience.

8. The company has launched some new products and has several others in the pipeline. NVIDIA’s CEO Jen-Hsun Huang announced the launch of GeForce NOW and introduced SHIELD TV. Also notable is the 256-core Tegra X1 mobile processor.

9. NVIDIA’s alliance with Baidu for bringing in AI technology in cloud-computing services, self-driving vehicles and home assistance spaces will stoke its growth. Per the agreement, Baidu uses NVIDIA’s Volta GPUs in its cloud offerings and AI framework Paddle, through which companies and researchers can develop products and services, with real-time understanding of images, speech, text and video. The next big thing is that Baidu has selected NVIDIA's DRIVE PX 2 AI supercomputer for its self-driving car initiative known as Apollo.

10. NVIDIA’s focus on GRID platforms can increase GPU adoption in data centers, giving it an advantage against its competitors. NVIDIA GRID is a powerful GPU-based platform that supports corporate virtualized desktops in data centers, cloud gaming services and design software-as-a-service. GRID provides a visually rewarding graphics experience that a company may otherwise derive from an expensive, dedicated PC.

11. NVDA quarterly revenue growth was 40.80%, higher than the industry and sector average revenue growth (3.13% and 3.66%, respectively). See NVDA revenue growth chart.

12. NVDA profitability is improving. The YoY profit margin change was 7.26 percentage points. See NVDA profitability chart.

13. NVDA average analyst rating is Buy. See NVDA analyst rating chart.

14. NVDA average analyst price target ($303.15) is above its current price ($212.69). See NVDA price target chart.

Now that you understand the bull case, let’s look at the reasons to sell NVDA stock (i.e., the bear case):

1. Rapid product cycles could make it difficult for Nvidia to sustain its lead over AMD. Previously, NVIDIA and ATI made graphics chips for the PC market. Later AMD acquired ATI and combined the CPU and parallel graphics chip into a single component. AMD is now making an effort to strengthen its position in the commodity graphics segment and CPUs for console gaming systems. AMD chips have made an entry into Sony Corp.'s PS4, launched in the last holiday season. Nintendo’s Wii U and Microsoft’s Xbox One will also be going with AMD.

2. Nvidia's automotive endeavors face plenty of competition, as numerous chipmakers are targeting the market.

3. A majority of sales come from the maturing PC industry. The secular decline in the PC market has affected many chip makers, including big names like Intel and AMD. The overall PC market was mainly adversely affected by weak demand for consumer PCs.

4. Customer concentration is a major risk for NVIDIA. During fiscal 2017, about 12% of total revenue came from its biggest customer, ASUSTeK. Also, its top two customers accounted for approximately 29% of total accounts receivables.

5. NVDA Price/Sales ratio is 13.51, and it’s high compared to its industry peers’ P/S ratios. See NVDA forward Price/Sales ratio chart.

Now let's look at the key statistics for NVDA:

Metrics NVDA
Price $262.77
Average Price Target / Upside $295.06 / 12.29%
Average Analyst Rating Buy
Forward Dividend Yield 0.24%
Industry Semiconductors
Sector Technology
Number of Employees 13,277
Market Cap $148.76B
Forward P/E Ratio 26.59
Price/Book Ratio 13.63
Revenue (TTM) $10.92B
YoY Quarterly Revenue Growth 40.80%
Profit Margin 25.61%

What are your thoughts on NVDA?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finny Bites, please send us an email at hi@askfinny.com.

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