NVDA: Set Up for Big Gains With Nvidia’s Momentum

Shares of Nvidia Corporation (NASDAQ:NVDA) have been pushing fresh 52-week peaks in recent weeks and look poised for further gains based on strong momentum. NVDA stock had been in a four-month trading range before the recent run to blue-sky territory and has several catalysts that could propel it on a run past $25.

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Nvidia recently announced better-than-expected fourth-quarter earnings, as it reported a profit of 43 cents per share on revenue of $1.25 billion. Wall Street was looking for 29 cents per share on sales of $1.2 billion. This was Nvidia’s fourth-straight earnings beat over the past year, and analysts are starting to take notice.

One brokerage firm upgraded NVDA stock to “Buy” from “Neutral” last week following an earlier upgrade in December to “Neutral” from “Underperform.” Another brokerage firm upgraded shares to “Sector Perform” from “Underperform” late last year.

The upgrades on Nvidia stock and sector make sense, as the semiconductor space has been hot lately. Consolidation within the sector is also increasing as the industry matures. Nvidia’s synergies could make it a nice takeover target.

Nvidia recently launched its new computer graphics mobile chip, the Tegra X1, which provides twice the performance of its previous chip, the Tegra K1. The new chip will be used in a number of future products, including Nvidia’s own upcoming video game console named “Shield.” The unit is expected to cost $199 and will be released in May.

The Shield will use Google Inc‘s (NASDAQ:GOOG) Android software to allow content streaming from Android smartphones and tablets. Nvidia’s Grid service will be used for the streaming of video games directly to the console.

It remains to be seen if the console will rival or compete with Microsoft Corporation‘s (NASDAQ:MSFT) Xbox or Sony Corp (ADR)‘s (NYSE:SNE) PlayStation as far as revenue numbers, but at least Nvidia is giving it a shot.

There are litigation risks that come with owning NVDA…

As Nvidia has lawsuits pending with Qualcomm, Inc. (NASDAQ:QCOM) and Samsung (OTCMKTS:SSNLF). Other lawsuits could follow as Nvidia is aggressive in protecting its patents. Nvidia recently negotiated a $1.5 billion settlement deal with Intel Corporation (NASDAQ:INTC), and there is water-cooler talk that a settlement with Apple Inc. (NASDAQ:AAPL) could be next. Apple is and has launched a number of new products and might strike a deal to avoid a legal battle.

Of course, verdicts could go against Nvidia without settlements, but I’m not too worried about that. Instead, I’m more focused on NVDA’s recent product developments and the stock’s momentum.

As I mentioned above, NVDA stock recently made a strong breakout out of a four-month trading range of $19 – $21. Near-term support is at $22, while resistance is at $23 and the 52-week high of $23.42. A close above the latter should lead to a run to $25-$26. With that in mind, I like the NVDA April 23 Calls at current levels to play the move to new highs.

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