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Bull of the Day: NVIDIA (NVDA)

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Founded in 1993 and headquartered in Santa Clara, CA, NVIDIA Corporation (NVDA - Free Report) is a worldwide leader in visual computing technologies and the inventor of the graphic processing unit (GPU).


The company has successfully transformed from a graphics chip to a GPU computing company and benefits from four multi-billion dollar GPU computing growth drivers —gaming, virtual reality (VR), artificial intelligence (AI), and self-driving cars.


Excellent Second Quarter Results, Upgraded Guidance


The company reported excellent results, beating on both the top and bottom lines and also raising guidance. Record revenues of $2.23 billion were up 56% from a year ago and also ahead of the management’s guidance.


GAAP earnings for the quarter were $0.92 per share up 124% from $0.41 a year ago and up 16% from $0.79 in the previous quarter.


"Adoption of NVIDIA GPU computing is accelerating, driving growth across our businesses," said the CEO. "Datacenter revenue increased more than two and a half times. A growing number of car and robot-taxi companies are choosing our DRIVE PX self-driving computing platform. And in Gaming, increasingly the world's most popular form of entertainment, we power the fastest growing platforms - GeForce and Nintendo Switch.”


"Nearly every industry and company is awakening to the power of AI. This is the era of AI, and the NVIDIA GPU has become its brain. We have incredible opportunities ahead of us," he said.


NVDA’s is also witnessing increasing demand for its GPUs for cryptocurrency mining. “Cryptocurrency and blockchain is here to stay. The market need for it is going to grow, and over time it will become quite large,” said the CEO.


Despite impressive beat and raise, shares fell nearly 7% on Friday but more than recovered all those losses on Monday as many analysts issued bullish notes on the company, given its excellent long-term growth potential.


Estimates Soaring


After impressive results and upgraded guidance, Zacks Consensus Estimates for the current and next year have surged to $3.56 per share and $3.88 per share from $3.08 and $3.47 respectively.


The company has an excellent record of beating estimates, having missed only once in the past 20 quarters, as you can see from the beautiful chart below:

NVIDIA Corporation Price and EPS Surprise

NVIDIA Corporation Price and EPS Surprise | NVIDIA Corporation Quote


Bottom Line


NVDA shares are not cheap. They have almost tripled over the past year and currently trade at a forward PE multiple of 47.36x. But given strong demand for its chips in many high growth areas including data centers, AI, automated cars, gaming, AR/VR and cryptocurrency mining, they are still worth buying at these levels.


The stock has jumped back to a Zacks Rank #1 (Strong Buy) after strong results. Further, industry rank in the top 5% also suggests strong chances of outperformance in short term.


Disclosure: I own shares of NVDA in my personal trading portfolio.


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