Analyst Upgrades Rating on NVIDIA (NVDA) Post Q3 Results

By Carrie Williams

NVIDIA, analyst upgrades to BuyAfter posting stellar Q3 results on Thursday, November 10, NVIDIA Corporation (NASDAQ: NVDA), popularly known as the maker of computer processors for video games, connected cars, and data center, surged ahead by nearly 5.6% in a single day. The tech stock is currently trading at $87.97, quite close to its 52-week high of $88.77.

NVDA had beat the estimates by a huge margin, posting a Q3 EPS of $0.94 (vs street estimates of $0.57) and revenue of $2 billion (vs $1.69 billion). The revenue is an increase of +53.8% YoY. In his report to investors issued today, Needham analyst Rajvindra Gill upgraded the stock to a Buy rating with a price target of $100. The price target is an upside of 13.67% from the current levels.

Gill explained his reasoning for the rating upgrade;

“Our upgrade is principally based on long-term secular trends: 1) incorporation of ADAS applications in automotive market (25MM+ cars by 2019) and where NVDA’s Drive PX2 supplies Level 3-5 autonomy (~$6B TAM); 2) proliferation of machine learning, AI and graphics virtualization in the data center; and 3) emergence of virtual reality devices in PC and gaming mkts driving higher graphics content.”

Consequently, Gill updated the FY17 EPS estimates to $2.93 and FY18 EPS estimates to $3.10 to reflect NVDA’s growth and expanding TAM. By assuming a revenue growth of 24% YoY vs the previous estimate of 15%, Gill estimates an EPS of $3.70/share for FY18 on a bullish bias and base EPS of $3.10.

NVDA’s recent deal with Tesla for producing car chips for Tesla’s “Autopilot” system had helped in increasing the revenue of automotive section of Nvidia by 60.8%. During the upcoming holiday season, many hardcore gamers are eyeing to purchase heavy duty graphics card for playing recently released games like Battlefield 1 and Call of Duty: Infinite Warfare. This is expected to further increase the sales of Nvidia chips.

In addition to the booming computer graphics business, the car chip manufacturing part of the business also seems to have taken off for NVDA. Unless Trump presidency plays spoilsport, NVDA is all set to extend its winning streak in the upcoming quarters.

Nvidia has an overall rating consensus of a Moderate Buy according to data by TipRanks.com which is based on 23 analysts providing ratings on the stock in the past three months. The average price target of the analysts is $83.89, which is a downside of 4.64 from the last close.