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NVDA Has a Chance to Become the Next Qualcomm

Stock (Symbol)

NVIDIA (NVDA)

Stock Price

$128

Sector
Retail & Travel
Data is as of
May 14, 2017
Expected to Report
Aug 9
Company Description
Nvidia Corporation focuses on personal computer (PC) graphics, graphics processing unit (GPU) and also on artificial intelligence (AI). The Company’s operates through two segments: GPU and Tegra Processor. The Company’s GPU product brands are aimed at specialized markets, including GeForce for gamers; Quadro for designers; Tesla and DGX for AI data scientists and big data researchers; and GRID for cloud-based visual computing users. The Company’s Tegra brand integrates an entire computer onto a single chip, and incorporates GPUs and multi-core central processing units (CPUs) to drive supercomputing for mobile gaming and entertainment devices, as well as autonomous robots, drones and cars. Source: Thomson Financial
Sharek’s Take
David SharekNVIDIA (NVDA) is on fire! The stock was $20 two years ago and is now $128. Wait, that was when these charts were done 5/14. By 5/30 it shot to $142 and today, 7/25, the stock is $165. I’m not redoing these charts, so let’s go with what we have. NVDA’s profits hovered around $1 from 2011 to 2015 then in 2016 surged to $2.57. The reason is its technology. NVIDIA has made technological advances that put it as the leader in (1) video gaming, (2) driverless car technology, and perhaps (3) artificial intelligence. NVDA advanced chips and gaming devices turn science fiction into reality. Playing or watching like you’re actually there. In the last five years video game technology has grown ten-fold, and is a $5 billion industry. Watching games taking place is growing in popularity and sometimes gets viewership numbers comparable to real sporting events. The next big thing could be a new server type device that NDIDIA is expected to debut this Fall that does the work of what 400 servers do now. NDVA could be this decade’s Intel or Qualcomm and revolutionize technology while the stock compounds in value. I don’t have a clue as to where NDVA stock can go from here, but it does concern me it’s up from $20 in two years and we would be buying in now. Investors who got in late on Qualcomm got hurt when the stock fell and never recovered. NVDA doesn’t have excellent numbers. Profits are expected to climb from $2.57 last year to $3.09 this year, $3.46 next year and $4.05 in 2019. That’s maybe 15% growth. The company missed by 2 cents last qtr and qrtly profit estimates for the next 4 qtrs are 73%, -7%, -16% and -10%. So in a nutshell, this company has the best processing technology that could and probably will change the world, but the numbers going forward don’t look great. Thus I wait for a correction. Also as a side note the figures I got from Thomson Financial don’t match the ones in the company press releases and annual reports.
One Year Chart
Wow, what a run. I usually don’t invest in chip stocks, which is why I didn’t buy earlier. I have a rule not to buy chip stocks. But I like the devices NVDA creates — like video game devices and boxes that control driverless cars. Looking at the chart, the $125 breakout shown here was a buy signal. But I didn’t climb aboard because of the qtrly Estimates of 73%, -7%, -16% and -10%. The Est. LTG is just 12% per year, that’s really low.
Fair Value
My Fair Value is 45x earnings, which works out to $139 this year and $156 next year. This stock’s already over that so what do I know.
Bottom Line
NVIDIA’s ten-year chart is very messy. But what scares me the most is the parabolic move the stock made the past two years. This is a great company with the potential to advance in technology that create things we can’t even imagine. I feel NVDA is a core holding for growth stock investors, but at these levels I think its best to be cautious and wait to get in on a correction. The numbers here just don’t look great. NVDA is on my radar, I’m looking to buy on a dip.
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