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

Shares of NVIDIA CorporationNVDA hit a new 52-week high of $32.78 on Dec 1. The stock closed at $32.75, representing a year-to-date return of 65.4%. The average trading volume for the last three months aggregated approximately 8,704K.

An impressive track record of exceeding the quarterly earnings expectations in addition to the encouraging fourth-quarter fiscal 2016 revenue outlook, solid cash flows and regular innovative product launches drove NVIDIA shares higher.

With respect to the earnings surprise, this Zacks Rank #1 (Strong Buy) stock has surpassed the Zacks Consensus Estimate in three out of the last four quarters with an average surprise of 53.2%.

Recently, NVIDIA reported better-than-expected third-quarter fiscal 2016 results. The company's 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 40 cents per share comfortably beat the Zacks Consensus Estimate of 25 cents.

Revenues not only increased 6.5% year over year to $1.31 billion but also surpassed the Zacks Consensus Estimate of $1.18 billion. The year-over-year increase was primarily backed by stronger-than-expected growth in GTX gaming platform, high-performance computing, cloud and automotive platforms.

Over the last 30 days, 13 out of 16 estimates for NVIDIA were revised upward for the current quarter, while 12 out of 13 estimates moved north for fiscal 2016. The Zacks Consensus Estimate for the current quarter increased 22.2% (6 cents) to 33 cents and that for fiscal 2016 went up 31.6% (25 cents) to $1.04.

For the fourth quarter, NVIDIA expects revenues of roughly $1.30 billion (+/-2%), primarily on the back of the growth in gaming, data center, cloud and auto infotainment businesses. The Zacks Consensus Estimate is pegged at $1.223 billion.

It is worth mentioning that NVIDIA's focus on GRID platforms can increase GPU adoption in data centers, giving it a competitive advantage. 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 entered into a strategic alliance to run the NVIDIA GRID technology on VMware Horizon Desktop-as-a-Service (DaaS) platform. This will help the former to enrich its virtualization, automation and cloud-based portfolios. We believe that NVIDIA's GRID enterprise virtual graphics, which enhance the visual effects of games, will support 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 consider the higher adoption of NVIDIA's Tegra processors to be a catalyst, going forward.

Nonetheless, the persistent decline in PC sales is a 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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