This article was written by Yosef Cohen, a Financial Analyst at I Know First .

Nvidia Stock Analysis

Summary

NVDA company summary

Earnings Analysis

Financial Statement Analysis

Partnerships and elite and diversified products

I Know First Forecast on NVDA

NVDA Company Summary



NVDA has grown a miraculous nearly 200% since the beginning of 2016. Speculation shows that its run isn’t over. Nvidia Corporation (NVDA) is in the semiconductor industry and produces visual computing chips. Nvidia’s main products are GPUs (graphics processing units) for the gaming industry and Tegra chips (system on a chip units) for the mobile computing and newly introduced, the automotive market. The main product sectors in Nvidia are gaming, professional visualization, data center, and automobiles.

Q3 Earnings and Analysis

Nvidia had very strong Q3 earnings which sparked a stark increase in stock price. Revenue topped $2.0 billion, trouncing expectations of $1.7 billion. This was a 53.6% increase from last quarter’s revenue. Earnings per share were $.83 beating expectations of $.57. Nvidia surpassed earnings expectations every quarter this year showing their bullish trend for future earnings. Net income this quarter reached $542 million, which is a 107% increase from last quarter’s $261 million. GPU sales were up 53% to $1.7 billion (85% of revenue). Tegra processors were up 87% to $241 million. GPUs sold to gamers crossed the billion-dollar mark in revenue despite dwindling PC sales.

These stunning numbers aren’t just a fluke. As CEO Jen-Hsun Huang said at earnings “We had a breakout quarter – record revenue, record margins and record earnings were driven by strength across all product lines.” There are reasons earnings were this strong. Nvidia has spent two billion dollars on R&D to provide better products to consumers. They have made alliances with companies that use their chips, which is what raised Nvidia’s revenue so much. Next quarter’s earnings should be stronger based on ongoing relationships and further product evolution. Revenue is expected to reach $2.1 billion with a 2% margin of error.

Financial Statement Analysis

Other aspects of Nvidia’s financial statements make it a good buy. The company’s gross margin is at 59.03% and has steadily been increasing over the last several quarters. This shows a decreasing cost of goods sold which is netting Nvidia higher profits. This, combined with higher quality products that has increased Nvidia’s revenue so much, is a strong augur for growing profits in the future.

Nvidia’s retained earnings is also at an impressive $4.68 billion. This year added one billion dollars to retained earnings showing what a successful year Nvidia had. Dividends were raised 22% to $0.14 per share after this quarter in order to give back more money to investors. Nvidia also spent $509 million in share repurchases in 2016, which shows Nvidia’s board’s belief in Nvidia growing into an even larger success.

Nvidia also has relatively low long-term debt at only $2.0 billion. This debt was taken on to do R&D this year on AI (which will be used in Tesla’s autopilot car program). This is significantly lower than retained earnings showing that Nvidia is a safe investment. It also shows that Nvidia took the loan to better its products – a promising investment for the future. Nvidia also has few little debt because it is in the tech industry. Most of their expenses are from R&D. This strong financial information is part of what makes Nvidia an attractive option even though it has already nearly tripled this year.

Partnerships and Elite and Diversified Products

Nvidia has branched out over the last year in terms of both products and partnerships. New lower-end products have cut into AMD’s market share in GPUs. Q2’s numbers for GPU market share were 70% Nvidia and 29.9% AMD. This quarter’s numbers should be higher for Nvidia. Nvidia has also been diversifying its products by entering new markets such as artificial intelligence, self-driving cars, and virtual reality. This will lead to further products being released from Nvidia, which will increase revenue.

Partnerships have also been what is making Nvidia so successful. Highlights this quarter include a partnership with Tesla for self-driving cars such as the Model S, Model X and the Model 3 and Nintendo for the Nintendo Switch. Nvidia’s chips are also being used for research in several universities: Stanford, New York University, and Berkeley. Nvidia’s products have and will continue to draw draw in more companies. Companies such as Microsoft and Sony can switch over from AMD’s GPUs to Nvidia’s for their next systems. Many other companies may also use Nvidia’s new AI technology as well as their advanced GPUs. This leads to large opportunities in Nvidia’s future, which can cause its stock price to further soar.

I Know First Forecast

Below you can find the forecast for NVDA. NVDA is projected to perform superbly in the next month, three months and year.

I Know First has predicted NVDA’s stock movements correctly in the past. This article was bullish on NVDA in June, and NVDA is up 96% since then.



This forecast was sent to I Know First subscribers on June 21st, 2016. To subscribe today click here.