Since March 6, shares of semiconductor giant Nvidia Corporation (NASDAQ:NVDA) have risen as much as 12.6%, reaching $110 on March 30. Why is this significant for NVDA stock? It was then — on March 6 — I told you Nvidia stock has bottomed. And with some patience, NVDA stock should reach $130 to $135 in the next 12 to 18 months, delivering 25% to 30% returns in 2017.
There have been questions about the value of the company, considering the increased competition from the likes of Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corporation (NASDAQ:INTC). NVDA stock, which entered 2017 red hot, gaining almost 300% by end of December 2016, has lost tons of momentum.
The shares have struggled so far this year, falling 2.6% year-to-date, including almost 7% declines in the past three months. And based on Friday’s close, the shares have fallen 13.5% since reaching a 52-week high of $120.70 on Feb. 10.
Reasons to Like NVDA Stock
Once traded at a forward price-earnings of 41, Nvidia will report first-quarter fiscal 2017 earnings results on May 9. The price-earnings has since fallen to 30 based in fiscal 2018 estimates of the $3.38 per share.
Nvidia now needs fundamentals to drive NVDA stock higher. And that’s not a bad thing, considering that Nvidia not only crushed Wall Street’s fourth-quarter estimates on almost every metric, the company also raised full-year guidance.
Led by its market-leading graphic processing chips (GPUs), Nvidia continue to enjoy a leadership positions in some of tech’s most important growth markets, including self-driving cars, artificial intelligence and PC gaming. The company’s GPU business, which produced 82% of its 2016 revenue of $6.9 billion, generated a whopping $2.1 billion in operating profit.
What’s more, in the fourth quarter, the company dispelled competitive fears from Intel by producing Datacenter revenue that surged 205% year-over-year. And based in the company’s first-quarter revenue guidance of $1.90 billion, higher than consensus estimates of $1.87 billion, Nvidia sees no signs of slowing down. To that end, the company’s first-quarter earnings to begin its march of NVDA stock back above $110 on its way toward $130.
For the three month that ended March, the Santa Clara, Calif.-based company is expected to earn 67 cents per share on revenue of $1.91 billion, translating to year-over-year growth of 103% and 46%, respectively. For the full year, earnings are projected to rise 12% to $2.88 per share, while revenue of $8.04 billion would rise 16.3% year-over-year.
Bottom Line for NVDA Stock
Nvidia, which has been the subject of multiple analyst downgrades this year, has become a victim of its own success.
But with fiscal 2018 earnings still projected to grow at roughly 20%, combined with rising cash flow and long-term addressable market opportunity projected to rise to over $62 billion, now’s the time to add to your NVDA position.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
