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NVIDIA (NVDA) Attains 52-Week High on Solid Momentum

Shares of NVIDIA CorporationNVDA hit a new 52-week high of $24.80 on Oct 2, 2015. The stock eventually closed at the same price, representing a one-year return of 36.9% and a year-to-date return of 23.7%. The average trading volume for the last three months aggregated approximately 8,537K shares.

An impressive track record of beating quarterly earnings expectations along with an encouraging third-quarter fiscal 2016 revenue outlook, solid cash flows and regular innovative product launches drove NVIDIA to the new high.

With respect to earnings surprise, this Zacks Rank #3 (Hold) stock has surpassed the Zacks Consensus Estimate in three out of the last four quarters with an average surprise of 41.7%.

Recently, NVIDIA reported better-than-expected second-quarter fiscal 2016 results, primarily backed by lower operating expenses as a percentage of revenues and higher growth in GTX gaming platform, data center, high-performance computing, cloud and automotive platforms.

Revenues not only increased 4.5% year over year to $1.15 billion during the quarter but also surpassed the Zacks Consensus Estimate of $1.02 billion. Revenues from GeForce GPUs for desktop and notebooks increased 9% year over year to $959 million, driven by robust demand in high-end Maxwell GPUs coupled with strength in high-performance computing and cloud, and automotive. Also, continued strength in PC gaming impacted the quarter's revenues.

The company reported adjusted earnings (including stock-based compensation but excluding interest expense related to amortization, other acquisition-related costs and other one-time items) on a proportionate tax basis of 26 cents per share, surpassing the Zacks Consensus Estimate of 11 cents.

Over the last 60 days, all the 15 estimates for NVIDIA were revised upward for the current quarter, while 8 out of 12 estimates rose higher for fiscal 2016. The Zacks Consensus Estimate for the current quarter increased 38.9% (7 cents) to 25 cents and that for fiscal 2016 increased 3.9% (3 cents) to 79 cents.

For the third quarter of fiscal 2016, NVIDIA expects revenues of approximately $1.18 billion (+/-2%), primarily due to growth in gaming, data center, cloud and auto infotainment businesses. The Zacks Consensus Estimate is pegged at $1.127 billion.

It is worth mentioning that NVIDIA's focus on GRID platforms can increase GPU adoption in data centers, giving it an advantage against its competitors. NVIDIA GRID is a powerful GPU-based platform that supports corporate virtualized desktops in data centers, cloud gaming services and design software-as-a-service. NVIDIA and VMware VMW had entered into a strategic alliance to run NVIDIA GRID technology on VMware Horizon Desktop-as-a-Service (DaaS) Platform. This will help NVIDIA to enrich its virtualization, automation and cloud-based portfolios.We believe that NVIDIA's GRID enterprise virtual graphics, which improve the visual effects of games, will help in future revenue and margin growth.

Furthermore, we believe that NVIDIA's innovative product pipeline and strength in gaming and high-end notebook GPUs keep it well positioned. We also believe that higher adoption of NVIDIA's Tegra processors could act as a catalyst, going forward.

Nonetheless, the continuous decline in PC sales is a cause of concern for NVIDIA's GPU segment. Competition from the likes of Intel INTC and QUALCOMM Inc. QCOM also remains a near-term headwind.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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