This week, NVIDIA Corporation (NASDAQ:NVDA), despite its significant cash balance, has decided to undertake a shelf filing. Nomura analyst Romit Shah believes whether NVDA is looking to boost its U.S. cash balance, already estimated to be $800 to $900 at the close of the July quarter, or bolster its buyback, “the filing was generally ignored by investors. And perhaps for good reason.”
As such, the analyst remains bullish even as NVDA is in discussions to sell seven different types of securities in this week’s filing, from common stock to preferred stock to depositary shares. Shah reiterates a Buy rating on NVIDIA with a price target of $62.50, which represents a 5% increase from where the shares last closed.
In fact, Shah finds the chip maker to be in great standing with its solid balance sheet, which he considers “one of the strongest in our coverage universe. NVDA boasts a stellar cash balance, with Shah estimating cash and marketable securities during the October period to bring in over $5 billion, which translates to 15% of the market cap.
Additionally, Shah forecasts free cash flow will hit close to $2 billion in run-rate annually come the fiscal second half of 2017, asserting, “In semis, Nvidia truly is one of kings of cash.”
From his perspective, “Overall, it reads to us as though management is considering something more than just housekeeping” and though there is no palpable proof yet as to the intention of these proceeds, the analyst has a hunch that an acquisition could be imminent.
“We remain positive on shares of Nvidia, especially on a pullback. We believe the prospects for an acquisition that boosts the company’s presence outside of gaming could accelerate growth longer-term. Expectations for no growth in the January period and 8% overall in 2017 also seem conservative. And investors from our perspective remain largely skeptical because of valuation and the strong share performance over the last 12 months,” Shah concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Romit Shah is ranked #253 out of 4,124 analysts. Shah has a 60% success rate and garners 9.1% in his yearly returns. When recommending NVDA, Shah earns 21.5% in average profits on the stock.
TipRanks analytics exhibit NVDA as a Buy. Based on 21 analysts polled in the last 3 months, 12 rate a Buy on NVDA, 7 maintain a Hold, while 2 issue a Sell. The 12-month average price target stands at $65.41, marking a nearly 10% upside from where the stock is currently trading.