Investment firm, Goldman Sachs upgraded NVIDIA Corporation (NVDA Quick QuoteNVDA - Free Report) to “conviction buy” from “buy”, pushing the target price to $129 from the previous $92, marking an increase of approximately 27%.

Following the news, NVIDIA’s share price increased more than 3%, reaching a high of $106.13 and eventually closing at $105.17 on Dec 20, 2016.

Over the last one year, shares of NVIDIA have generated a tremendous return of 219.37% compared with the Zacks Semiconductor General  industry's gain of 28.90%.

What Goldman Has to Say

Toshiya Hari, an analyst at Goldman, remains optimistic about NVIDIA’s robust growth in gaming, automotive, virtual reality and machine learning. Also, the analyst believes that NVIDIA will see increasing market share with solid growth in its innovative product pipeline and strength in gaming and high-end notebook GPUs. According to the analyst, NVIDIA is a "unique growth story in semis."

It is worth mentioning that Goldman estimates revenues from NVIDIA's data center business to almost double in fiscal 2018 and grow 53% in fiscal 2019. Gaming revenues are expected to grow 20% in 2018 and almost 28% in 2019.  Earnings per share estimates for 2018 and 2019 are projected to increase 18% and 33%, respectively. Undoubtedly, Goldman is imagining NVIDIA to grow faster than ever before and ahead of others in the technology space.

What’s Backing NVIDIA’s Growth?

Widely known for its video gaming chips, NVIDIA has pioneered the art and science of visual computing. With a singular focus on this field, the company offers specialized platforms for the gaming, automotive, data center and professional visualization markets. Its products, services and software deliver amazing experiences in virtual reality, artificial intelligence and autonomous cars.

NVIDIA’s sustained efforts toward attaining robust position in several emerging industries such as artificial intelligence, deep learning and driverless cars industry make us optimistic about its growth prospects. The company’s focus on GRID platforms can increase GPU adoption in data centers, giving it an advantage against its competitors.

Most recently, the company teamed up with the National Cancer Institute and the U.S. Department of Energy (DOE) in its bid to further accelerate cancer research.

Also the company collaborated with Microsoft (MSFT Quick QuoteMSFT - Free Report) on artificial intelligence to make the technology accessible to enterprises.

Notably, the company also collaborated with IBM (IBM Quick QuoteIBM - Free Report) on a deep learning tool targeted at making computers think and learn in a human-like manner at an accelerated pace.

Most recently, NVIDIA achieved another milestone in the driverless cars industry after the California Department of Motor Vehicles (CDMV) granted it a permit for testing self-driving vehicle technology on public roads for the first time.

It should be noted that California has been a hotbed for autonomous testing since 2014, as it was the first state that established regulations for self-driving vehicles on its public roads. Since then, various companies including Alphabet Inc. (GOOGL Quick QuoteGOOGL - Free Report) and Tesla Motors have been cleared by CDMV to test their driverless cars.

Therefore, we believe that the recent permit to test its driverless cars will encourage various other auto manufacturers to use NVIDIA’s processing units in their autonomous driving systems.

Last Quarter Update & Guidance

In the third quarter of fiscal 2017, the company posted earnings of 83 cents, much better than the Zacks Consensus Estimate of 57 cents. This was preceded by another significant beat of 18.9% in the second quarter, indicating that the stock is on fire.

NVIDIA’s overall revenues for the quarter surged over 53% year over year, mainly driven by strong growth registered at three of its four major segments – gaming, datacenter and automotive. Though the company has always performed well in its gaming business, which registered year-over-year growth of over 63% in the last quarter, we are mainly encouraged by overwhelming growth registered in datacenter and automotive businesses.

The company also provided a decent revenue guidance for the fourth quarter. For the fourth quarter of fiscal 2017, NVIDIA expects revenues of approximately $2.10 billion (+/-2%). The Zacks Consensus Estimate is pegged at $2.10 billion.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2017 increased 30.6% to $2.43 over the last 60 days as all 10 analysts revised their estimates upward. Also, for fiscal 2018, estimates increased 43.5% to $2.77 per share over the same time frame, as 11 out of 13 analysts revised their estimates upward.

Conclusion

Given the accelerated momentum in gaming, datacenter and automotive technology, we believe the stock with a long-term EPS growth estimate of 10.3% will continue to trend higher. NVIDIA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The stock has come up with impressive performances on the back of solid earnings results and strong growth projections. Therefore, we believe betting your money on this stock will generate strong returns for your portfolio in the short term.

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