Some analysts are starting to say that it’s overvalued. Others are scared about its nearly uninterrupted run, and have declared that it has nowhere to go but down. I guess I shouldn’t be surprised since the stock has surged 644% in the past two years alone!
But, in my opinion, they’re wrong. In fact, I’m extremely bullish about this stock. So much so that it’s my top stock for 2018. And now, I want to help you understand exactly why…
The Strengths of Nvidia Stock
For starters, Nvidia Corporation (NASDAQ:NVDA) just dropped what’s known as the “holy grail” of gaming graphics right into the gaming industry’s lap. In March, NVIDIA revealed their new ray-tracing technology, NVIDIA RTX™.
Never heard of ray tracing? Simply put, it’s an advanced way of processing light rays that results in realistic and lifelike reflections and shadows.
Tech giants have been trying to perfect this technology for decades. Architects have been clamoring for it to render sharper, better designs. And now, Nvidia’s new tool is going to make ray tracing a reality for countless game developers and content creators alike.
The great thing is that, when it comes to NVDA’s products and solutions, ray tracing is just the tip of the iceberg. Nvidia stock is at the forefront of the next wave of computing. Its artificial intelligence has made significant inroads in the healthcare industry, as well as the markets for virtual-reality-based products and self-driving cars. In fact, major car manufacturers continue to line up for Nvidia’s DRIVE™ platform.
Most recently, Volkswagen announced it plans to create its next fleet of cars using DRIVE.
And just think, all this started from one simple vision: Three individuals decided to turn the PC from something limited to hobbyists and technicians to a consumer gadget for gaming and multimedia. Over the course of its 25-year history, Nvidia is most well-known for inventing the world’s first GPU. As the soul of the PC, GPUs speed up the production of images on electronic devices. And NVDA’s GPUs have gone viral, powering everything from the world’s fastest supercomputer to data centers across the globe, drones and robots.
Add it all up, and it’s no wonder that the company continues to cash in big time. For NVDA’s fourth quarter in fiscal year 2018, total sales climbed 34.1% year-over-year to $2.91 billion, topping analysts’ estimates for $2.68 billion. Adjusted earnings per share soared 58.6% year-over-year to $1.57, exceeding estimates for $1.17 by 34.2%. And I’d be remiss if I didn’t note that this quarterly report led the stock market’s recovery from its Feb. 8 intraday lows.
Looking forward, the rally in NVDA stock is only going strengthen from here. Just consider forecasts for Nvidia’s first quarter in fiscal year 2019: The analyst community is calling for 49.1% annual sales growth and 83.5% annual earnings growth. Even better: Analysts have revised their EPS estimates a stunning 49% higher in the past two months, so another quarterly earnings surprise is likely.
Given its superior fundamentals, Nvidia also has the cash flow necessary to reward its shareholders quarter after quarter. In fact, the company has paid investors consistently for 21-straight quarters, or for five years. And I’ve seen healthy dividend growth. In the past six months alone, Nvidia stock has upped its dividend by 7%. The company paid a quarterly dividend of 15 cents per share on March 16, up from 14 cents per share last September. At current prices, NVDA has a dividend yield of 0.2%.
In my opinion, you should view any dip in NVDA as a buying opportunity, especially before the company’s next earnings release on or around May 10. Considering that Nvidia stock bounced about 15% in the week following its fourth-quarter earnings report, I wouldn’t be surprised to see NVDA climb higher in the wake of a better-than-expected first-quarter report. And then, it might just become your top stock pick for 2018, too.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.