Shares of NVIDIA Corp. (NVDA - Analyst Report) hit a new 52-week high of $17.46 on Feb 13, eventually closing at $17.36. The closing share price represents a modest one-year return of 36.4% and year-to-date return of 9.5%.
Some of the optimism related to NVIDIA shares are attributed to the company’s better-than-expected fourth-quarter results declared on Feb 12. The company witnessed strong sales of GeForce, GTX, desktop and notebook GPUs.
NVIDIA’s GPU revenues for the quarter came in at $947.0 million, up 14.0% on a year-over-year basis. Tegra processor revenues grew 18.0% sequentially to $131.0 million aided by an increase in the sale of Tegra mobile devices.
Despite strong top-line performance, higher-than-expected operating expenses led to a year-over-year decline in the bottom line. Nonetheless, the company provided encouraging revenue guidance for the first quarter of 2015.
During the quarter, NVDIA gained a significant traction in the Tegra segment due to its Tegra 4 and Tegra K1 shipments, which boosted sales at both Tegra and GPU segments.
We believe NVIDIA’s innovative product pipeline, including the recently introduced SHIELD and mobile processor Tegra K1, will boost top-line growth, going forward. With the launch of this CUDA-core Tegra K1, NVIDIA can maximize user experience by offering high performance computing (HPC) capabilities, which in turn will increase its customer base and help in garnering additional revenues
Moreover, NVIDIA’s strategic alliance with International Business Machines (IBM - Analyst Report) to produce GPU-accelerated editions of IBM's enterprise software running on its Power technology. The partnership strengthens NVIDIA’s position versus Intel Corp. (INTC - Analyst Report) .
However, the continuous decline in PC sales is a cause of concern for the company’s GPU segment. Competition from the likes of Intel and QUALCOMM Inc. (QCOM - Analyst Report) and higher operating expenses are also expected to hurt profitability in the near term.
NVIDIA currently has a Zacks Rank #3 (Hold).