Graphics specialist Nvidia (NASDAQ:NVDA) stock has outperformed the S&P 500 by over 63% in the past 12-months.
The company has been firing on all cylinders in the past year, with year-over-year revenue growth of over 63%. Moreover, it continues to widen its lead over its competition in the discrete graphics processing unit (GPU) market.
However, it has evolved significantly beyond its legacy business in recent years and now finds itself at the forefront of several technological developments.
Therefore, NVDA stock is an exceptional long-term play with a massive growth runway ahead.
With a market capitalization of over $430 billion, many may consider NVDA stock to be overvalued at this point.
However, with yet another strong showing in its first quarter, Nvidia has reminded investors that it’s still a growth company.
Its exposure to an array of secular growth tailwinds points to substantial remaining upside. Therefore, even though it isn’t trading cheaply, it is an incredible company to hold for long-term investors.
Multiple Growth Prospects
Despite the competition’s best efforts to knock it off its perch, Nvidia has cemented its positioning in the GPU market.
Its market share is currently at 80% in the sector, which puts it in a dominant position against the competition. Gaming, in particular, has been its legacy business, but it appears to be diversifying its revenue streams in the past few years.
For instance, Nvidia’s data center revenues have risen significantly from just 7% in 2017 to 40% in 2020 as a percentage of total revenues.
Another long-term positive growth driver in its GPU market relates to cryptocurrencies. It released an Ethereum (CCC:ETH) mining card called NVIDIA CMP in February which raked in $155 million in sales as of May.
The company recently announced its entry into the CPU market. Its “Grace CPU” is expected to release in 2023 and is an Arm-based CPU for the data center segment.
Autonomous vehicles could also be a major growth driver for the company down the line. Its AI-powered DRIVE computing platform provides a comprehensive end-to-end platform for the AV market.
Though the segment currently generates only 3% of the company’s total revenues, it has a massive potential to grow exponentially.
Glowing Financials
Nvidia’s financial performance has been stellar in the past several years; however, it appears it hit a purple patch last year.
Nevertheless, in 2020, its revenues grew by an astounding 53%, with improvements in net income margins at 55% on a year-over-year basis.
It has picked up from where it left off last year, with an impressive showing in the first quarter this year. Its revenues shot up by an impressive 84% on a year-over-year basis to $5.6 billion.
In addition, data center and gaming segments reported strong growth numbers and were up by more than 70%.
Nvidia’s net income rose to $1.91 billion, more than double from the same period last year. Its cash flows from operations were at an impressive $1.89 billion, which indicates a healthy conversion rate.
Finally, it ended the quarter with a strong net cash position of $5.7 billion. All in all, its financials are a peach, and the company is in an excellent position to return capital to its shareholders for the foreseeable future.
Bottom Line on NVDA Stock
NVDA has been on a tear in the past year and continues to impress with its results. It has cemented itself as the undisputed leader in the GPU market, and the broad application of the technology is creating new income streams for the company.
Moreover, it is exposed to multiple growth sources over the next few years, which should further diversify its revenue base. Hence, NVDA stock is a buy despite its lofty price.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
