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Bull of the Day: NVIDIA (NVDA)

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NVIDIA (NVDA - Free Report) became a Zacks #1 Rank Strong Buy in January when shares were trading under $30. Since then, the stock has more than doubled and rising earnings estimates have the name back to a #1 again after a strong Q2 earnings report on August 11.

NVIDIA designs, develops and markets a top-to-bottom family of award-winning 3D graphics processors, graphics processing units and related software that set the standard for performance, quality and features for every type of desktop personal computer user, from professional workstations to low-cost computers.

NVIDIA's 3D graphics processors are well known in the video game industry, but the company has been steadily making inroads into virtual reality, education applications and machine learning technology like that for autonomous driving.

I last wrote about NVDA as our Bull of the Day on January 4 and here's what I said...

NVIDIA was the top performing large-cap semiconductor stock of the fourth quarter, with a stunning 60%+ move higher since their Q2 earnings report in early August.

And tonight at the International Consumer Electronics Show (CES) in Las Vegas, the company is likely to reveal further insights into their plans to stay hot on technology investor radars in 2016. In fact, they announced on New Year's Eve that they plan to unveil new technology for self-driving cars.

Firing On All Frontiers

NVIDIA reported revenue for the second quarter ended July 31 of $1.43 billion, up 9% sequentially and up 24% from $1.15 billion a year earlier. This was above the company’s original guidance range of $1.35 billion +/- 2%.

GAAP earnings per diluted share for the quarter were $0.40, compared with $0.05 a year ago and up 21% from $0.33 in the previous quarter.

The company saw growth across all platforms and noted the strong launch of Pascal-based GPUs and growing demand for deep learning applications. Gaming and professional graphics were the leaders, while datacenter and automotive also contributed to growth in the July quarter.

"Our strategy to focus on creating the future where graphics, computer vision and artificial intelligence converge is fueling growth across our specialized platforms -- Gaming, Pro Visualization, Datacenter and Automotive," said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA.

"We are more excited than ever about the impact of deep learning and AI, which will touch every industry and market. We have made significant investments over the past five years to evolve our entire GPU computing stack for deep learning. Now, we are well positioned to partner with researchers and developers all over the world to democratize this powerful technology and invent its future."

Great Quarter Launches Estimates Higher

NVIDIA gave forward guidance for revenue to be $1.68 billion +/- 2%. The midpoint here would be up 18% sequentially and up 29% yr/yr.

Based on the top and bottom line beats and company guidance, analysts moved quickly in the last week to raise EPS estimates for this year and next.

For the current fiscal year ending in January of 2017, the Zacks consensus jumped 17% from $1.56 to $1.83 as 11 analysts chimed in with fresh projections.

That equates to 69% annual EPS growth.

And for next year, 10 analysts boosted the consensus 24% from $1.54 to $1.91. The growth drops off here to only 4% and that might explain why the stock hasn't surged higher after the beat and raise for this year.

While there are some concerns among analysts that the company will face increasing competition in datacenters and gaming, NVIDIA continues to lead innovation in many areas.

If virtual reality is going to become foster viable entertainment and education platforms -- as Facebook (FB - Free Report) must believe with their $2 billion purchase of Oculus VR in 2014 -- NVIDIA's top technologies will be involved because the 3D graphic processing expertise required for VR is so demanding and specialized.

It's probably not something a startup or even giants Intel (INTC - Free Report) or Qualcomm (QCOM - Free Report) will overtake them on any time soon.

NVDA looks like one to buy on any dips into the $50s.

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