For the year so far, Nvidia Corporation (NASDAQ:NVDA) has been one of the biggest winners in the tech world, with the shares up about 48% to $158. But lately the action has been lackluster. During the past couple weeks, NVDA stock has been in a range of $143 to $155 or so.
Part of this has been due to the summer doldrums and a lack of interesting news. Such things have actually been the case for many of this year’s top tech operators like Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL).
But another factor that has weighed on NVDA stock is a recent downgrade from Citron Research (it is focused on short-sale opportunities). The firm now has a price target on the shares at $130. This assumes about 18% downside.
Three Advantages to NVDA Stock
However, despite all this, the fact remains that the fundamentals of the stock still look pretty good. So let’s take a look at three factors:
Nvidia Stock Advantage No. 1: Technology Prowess
The core technology for NVDA — the GPU (Graphics Processing Unit) — has proven to be quite versatile. It allows for the crunching of enormous amounts of data at a low cost. In other words, a GPU is spot-on for the growth markets like artificial intelligence, augmented reality and virtual reality.
Just look at Nvidia’s Drive PX system. It’s an AI platform focused on helping automakers develop their own autonomous vehicles. Here’s how the company explains it: “DRIVE PX can understand in real-time what’s happening around the vehicle, precisely locate itself on an HD map, and plan a safe path forward. It’s the world’s most advanced self-driving car platform — combining deep learning, sensor fusion, and surround vision to change the driving experience.”
This expertise in AI has also allowed Nvidia to get a big chunk of the fast-growing data center market. In the latest quarter, the revenues nearly tripled to $409 million. Some of the customers include AMZN, Microsoft Corporation (NASDAQ:MSFT) and FB.
And yes, even though NVDA has been in the gaming market from its inception, the business still remains strong, with revenues up 49% to $1.03 billion in Q1. Again, this has been the result of standout innovation.
Nvidia Stock Advantage No. 2: Financials & Execution
When it comes to execution, NVDA stock is near flawless. Time after time, the company finds ways to keep up the growth ramp — and to impress Wall Street.
Consider the latest earnings report. Total revenues shot up by 48% to $1.94 billion and GAAP earnings per share of Nvidia stock soared by 126% to $0.79. Basically, all parts of the business showed tremendous momentum.
NVDA CEO Jensen Huang noted: “The AI revolution is moving fast and continuing to accelerate. Nvidia’s GPU deep learning platform is the instrument of choice for researchers, internet giants and startups as they invent the future.”
The company has also been shareholder friendly. For fiscal 2018, about $1.25 billion is expected to be returned to shareholders through dividends and share repurchases.
Finally, it looks like the growth momentum will not let up anytime soon. Note that SunTrust Robinson Humphrey analyst William Stein recently upgraded NVDA stock with a $177 price target, saying that “there are still aspects of the company we think are under-appreciated.”
Nvidia Stock Advantage No. 3: Visionary Leadership
Before co-founding Nvidia, Huang had worked at companies like LSI Logic and Advanced Micro Devices, Inc. (NASDAQ:AMD). He started his career as an engineer, with a BSEE degree from Oregon State University and an MSEE degree from Stanford University.
This background proved critical for his standout performance as the leader of NVDA. By 1999, he helped to invent the GPU, which revolutionized the gaming industry. Yet Huang was also adept at M&A and hiring top-notch managers, such as CFO Colette Kress, who came over from Cisco Systems, Inc. (NASDAQ:CSCO).
Actually, the Harvard Business Review recently ranked Huang as a top-10 best-performing CEO. And hey, why not? During the last five years, NVDA stock has returned over 1,000%.
Tom Taulli runs the InvestorPlace blog IPO Playbook and operates PathwayTax.com, which provides year-round tax services. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
