NVIDIA Corporation (NVDA) is a visual computing company operating through two segments: GPU and Tegra Processor. It focuses on personal computer graphics, graphics processing units and artificial intelligence. NVDA’s products and services have applications in the gaming, professional visualization, datacenter, and automotive industries.
In the new age of exascale computing, NVDA has been able to enhance memory bandwidth, thereby increasing proficiency rate. This has allowed the company to become one of the leading players in the computing sector, with diversified business applications.
NVDA’s AI and hyper-scale cloud infrastructures have achieved unmatched performance through its cost-effective and resilient operational strategy. This has helped the stock gain 112.9% over the past year. This impressive performance combined with several other factors has helped NVDA earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates NVDA:
Trade Grade: C
NVDA is currently trading above its 200-day moving average of $494.56 but below its 50-day moving average of $528.52. However, the stock’s 28.2% gains over the past six months reflect solid short-term bullishness.
NVDA’s total revenues have increased 56.8% year-over-year to $4.73 billion in the fiscal third quarter ended October 25, 2020. Its non-GAAP operating income has improved 72.4% year-over-year to $2.00 billion over the same period, while non-GAAP EPS has increased 63.5% year-over-year to $2.91.
On November 16th, NVDA launched NVIDIA A100 80GB GPU for its AI Supercomputing platform. It has twice the memory of its predecessor. This will offer researchers and engineers an unprecedented speed and performance to accelerate their applications and take on even larger models and datasets.
On the same day, NVDA also launched the next generation of NVIDIA Mellanox 400G InfiniBand and NVIDIA DGX Station A100, the world’s only petascale workgroup server. These AI systems will accelerate demanding machine learning and data science workloads for teams working in corporate offices, research facilities, labs, or home offices everywhere.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers NVDA is well-positioned. The stock is currently trading 14.3% below its 52-week high of $589.07.
NVDA net revenue has grown at a CAGR of 18.1% over the past three years. This can be primarily attributed to the company’s ground-breaking AI supercomputing platform, which has helped it in achieving state-of-the-art results in providing highest application performance to advance scientific progress.
Peer Grade: D
NVDA is currently ranked #46 of 96 stocks in the Semiconductor & Wireless Chip Industry. Other popular stocks in this industry are Taiwan Semiconductor Manufacturing Company Ltd. (TSM), QUALCOMM Incorporated (QCOM) and Broadcom Inc. (AVGO).
TSM, QCOM and AVGO beat NVDA by gaining 86.8%, 62.7% and 33.5%, respectively, over the past six months.
Industry Rank: B
The Semiconductor & Wireless Chip Industry is ranked #25 out of the 123 StockNews.com industries. The companies in this industry are focused on manufacturing semiconductors (computer chips), and other components used in electronic devices as well as wafer processing equipment, semiconductor assembly and packaging equipment, and other machinery used to produce semiconductors.
As computing requirements continue to grow exponentially across multiple fields, the need for highly efficient AI processors have been accelerating. Also, the ongoing 5G transformation has increased the demand for semiconductors and electromechanical devices as the whole world moves to adopt the new technology. This should bolster this industry’s growth soon.
Overall POWR Rating: B (Buy)
NVDA is rated “Buy” due to its impressive past performance, solid short-term bullishness, and underlying industry strength, as determined by the four components of our overall POWR Rating.
Despite soaring more than 110% over the past year, we think NVDA has the potential to grow further based on its continued business growth, favorable earnings and revenue outlook and price momentum.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for NVDA. It has an average broker rating of 1.53, indicating favorable analyst sentiment. Of 38 Wall Street Analysts that rated the stock, 8 rated it “Strong Buy.”
Analysts expect NVDA’s revenues to rise 55% year-over-year to $4.81 billion in the current quarter ending January 31, 2021. The consensus EPS estimate of $2.80 for the current quarter represents a 48.1% rise year-over-year. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. This outlook should keep NVDA’s price momentum alive in the near term.
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NVDA shares were unchanged in after-hours trading Thursday. Year-to-date, NVDA has gained 2.21%, versus a 1.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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