is too cheap.
Analysts expect the company to report EPS of $0.86 this year,
giving the stock a P/E ratio of 14. The company may not be the
growth juggernaut that it was in the past. However, it's
transitioning into growing segments and gaining market share,
NVDA has been dragged lower during the past two years because PC
sales have flatlined. Many analysts believe that the PC era is
over. NVIDIA is a major supplier of the graphics chips inside
PCs. So a decline in PC demand hurts NVIDIA's business.
However, Wall Street seems to have forgotten that the company
branched out beyond PCs. Their graphics cards, specifically Tegra
and Icera, are in mobile devices -
including Google's Nexus
This segment of NVIDIA is expected to grow sales by 50% in 2013.
Moreover, TI exited the tablet industry, paving the way for
another company to supply graphics processors for the
Amazon.com Kindle lineup
In addition to the future growth opportunities from mobile and
handhelds, NVIDIA has an amazing balance sheet. The company
boasts more than $3.75 billion in cash and investments with
almost zero debt ($20 million). This cash balance also enabled
the company to initiate a 2.5% dividend this year. Furthermore,
that cash balance equates to nearly $6 per share and takes the
company's enterprise value down to about $4 billion.
This chart shows the price of
shares along with an important resistance level to
The shares are under some pressure in the near term. In fact,
the recent selling is only part of a much larger decline. NVDA
was a $25 stock in early 2011.
Though resistance exists around $13 (blue arrow), the sheer value
of the stock should be enough to entice new buyers. It yields
2.5%, too. A breakout above $13 should result in a quick ride to
$14.50. Over the long-term, NVDA is easily a $17 stock.
Equities mentioned in this article: NVDA
Positions held in companies mentioned above: