After gaining yet another 18 percent in the opening weeks of 2018, it seems as if nothing can slow down Nvidia Corporation (Nasdaq: NVDA). Despite the incredible run-up in recent years, a Bank of America analyst says there are still plenty of positive catalysts for Nvidia stock on the horizon.
Analyst Vivek Arya says online gaming will remain a cash cow for Nvidia for the foreseeable future. Bank of America’s most recent monthly gamer preference checks suggest Nvidia’s Pascal card series are steadily gaining market share but remain well below peak market share of the company’s previous generation Maxwell cards. A higher mix of Pascal cards is good news for Nvidia investors because of Pascal’s higher average sales price, which could drive Nvidia’s margins higher.
Arya says overall commercial card pricing is 27 percent higher than a year ago on soaring demand from online gaming and cryptocurrency mining.
On the gaming front, Arya says the popularity of the Nintendo Switch console has provided a major boost for Nvidia. The Switch was the highest-selling U.S. game console of all time during its first 10 months on the market, and Arya estimates that each console contains roughly $40 of Nvidia hardware.
In addition to the Switch’s popularity, the rise of esports is pushing users toward more high-end gaming equipment, another potential tailwind for Nvidia.
With a price-earnings ratio greater than 57, there’s plenty of reason for investors to think twice before paying for Nvidia stock. However, Arya says Nvidia is worth every penny.
“While the stock trades at a premium valuation, we believe this is justified by NVDA’s leadership in the largest and fastest growing markets in semis, including AI, gaming, VR and autonomous cars,” he says. “Our positive view on Nvidia is based on its underappreciated transformation from a traditional PC graphics chip vendor, into a supplier [of] high-end gaming, enterprise graphics, cloud, accelerated computing and automotive markets.”
Nvidia is off to another hot start in 2018. Earlier this month, Nvidia announced two new automotive partnerships with Uber and Volkswagen. Nvidia also largely avoided the negative publicity associated with major security vulnerabilities that impacted Intel Corp. (INTC) and Advanced Micro Devices (AMD) chips in the opening days of the year.
Arya says…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
