Shares of NVIDIA Corp. (NVDA - Analyst Report) hit a new 52-week high of $16.32 on Nov 14, eventually closing at $16.22. The closing share price represents a modest one-year return of 39.9% and year-to-date return of 27.5%.
Share prices have been increasing continuously since the company reported third-quarter results on Nov 7. NVIDIA reported modest sequential revenue increase in its GPU business (up 2.1% sequentially), while revenues from Tegra segment increased an astounding 111.4%. Desktop GeForce GPU revenues, revenues from GeForce gaming GPUs and high-end notebook GPUs increased on a sequential basis.
The Tegra segment was aided by the shipment of Tegra 4 processors to 15 mobile device manufacturers such as Hewlett Packard (HPQ - Analyst Report) , Microsoft (MSFT - Analyst Report) , Asus, Toshiba and Acer, to name a few.
The company expects the Tegra processors to generate incremental revenues, going forward, due to their acceptability and demand. Moreover, product launches such as GeForce GTX 780 Ti, a new gaming GPU, and Quadro K6000 graphics cards should positively impact revenues.
Apart from these, NVIDIA also increased its quarterly dividend payment by 13% and management authorized a stock repurchase plan worth $1.286 billion ending in Jan 2016. The company also intended to increase shareholders’ value through stock repurchases and quarterly dividend payments and expects to distribute $1 billion in 2015. These investor-friendly initiatives not only boost earnings but also instill investors’ confidence and loyalty.
Despite these positives, the continuous decline in PC sales is expected to impact NVIDIA’s GPU segment. Competition from the likes of Intel Corp. (INTC - Analyst Report) and QUALCOMM and higher operating expenses are also expected to hurt profitability in the near term.
Currently, NVIDIA carries a Zacks Rank #3 (Hold).