NVIDIA’s (NVDA) New Future Bet Takes its Stock to New Heights

Nvidia NVDA stock

NVIDIA Corp (NASDAQ:NVDA) shares continue their seemingly unstoppable upward trend. The name hit another all-time high yesterday, helped by the growing anticipation over the company’s next-generation product investments. The 3D-graphics firm, which began as a standard PC graphics chip specialist, continues to transform itself from a GPU inventor and producer of the technology behind high-quality graphics into a specialized platform company that besides Gaming now targets three other very large markets, including Professional Visualization, Datacenter and Automotive electronics. In fact, NVIDIA, which has increasingly worked itself into cars like Tesla Motors (NASDAQ:TSLA) by using NVIDIA’s Tegra 3 mobile multi-core processor to power its 17-inch LCD touchscreen, or its latest agreement to help China’s Baidu Inc (NASDAQ:BIDU) in its quest to build a self-driving car, is also developing an artificial intelligence computing platform called ‘Drive PX 2’, otherwise known as the brain running driverless cars, which helps vehicles locate themselves and avoid obstacles. According to Danny Shapiro, NVIDIA’s senior director of automotive, there are more than 80 automakers, including major names like Audi, Ford, Mercedes-Benz and Volvo relying on NVIDIA’s computing platform to power their self-piloting cars.

NVIDIA stock yesterday reached a peak of $65.26 hitting a market cap of nearly $35 billion before retreating to $64.17 a share. Moreover, year-over-year [yoy], NVDA shares have gained over 172%, compared with a gain of 8.75% in the S&P 500. The stock also hit a new 52-week high of $63.15 Sept. 1. Furthermore, NVDA has  advanced nearly 3% in the last 4 weeks and 34.75% in the past three months. Over the past 5 trading sessions the stock has gained 5.58%. Since January 1 the issue has surged more than 93 percent.

Currently there are 14 analysts that rate NVDA a ‘Buy’ versus 11 rating it a ‘Hold’. The stock has a median Street price target of $68 with a high target of $75. Additionally, NVIDIA’s massive 872% year-over-year profit growth gives the company a firm edge over the competition. YoY revenue growth is at 24%. Based on these metrics, it’s no surprise that the stock has gained over 300% since January 2014. It is to be noted here that the chipmaker’s tendency to embrace other markets and its strategy to bet on a different future has clearly taken it to new heights on Wall Street.

NVIDIA’s CEO Jen-Hsun Huang during the company’s 2Q17 conference call, a quarter that saw the computer chip designer bring in non-GAAP EPS of $0.53, 42% better than consensus, on revenue of $1.43 billion vs. projections for $1.35 billion, said “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.” Huang also discussed investment in deep learning, pointing to the future of the company’s business.

“We are more excited than ever about the impact of deep learning and Artificial Intelligence, which will touch every industry and market”, Huang told analysts, noting that the company has “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.”

While PC gaming platforms remain the core of NVIDIa’s business – in May, Huang said that the GPUs helped NVIDIA’s gaming business double over 36 months – the Santa Clara, Calif.-based company seems to be making good bets for the future by finding new applications for its cutting edge technology. Wall Street is obviously following along as reflected in the company’s surging share price. What’s more, the surge doesn’t appear to be slowing anytime soon. NVDA shares, which keep ticking near the $65 area, could return an additional 7-8 percent from current levels into the end of current fiscal year. Keep in mind, a convincing move above $65 would open a run to the $67 and then $70 area.

The equity looks solid so keep an eye on this medium to long-term trade idea.This is a fundamentally $100 ticker.

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