Nvidia (NVDA) has so far weathered the COVID-19 storm quite well. Although its share price dropped along with the majority of the market in March, it has already clawed back most of the coronavirus driven losses. Year-to-date its share price is up by 23%.
The performance is not much of a surprise to Tigress Financial’s Ivan Feinseth. In fact, according to the 5-star analyst, Nvidia’s opportunities in “all key secular leading-edge technology demands,” should continue “to drive higher returns on capital, increasing economic profit, and greater shareholder value creation.”
Nvidia dominates the gaming world, where its high-speed processors are ideally suited to power hungry gaming needs. Along with recently launching its GeForce Now cloud gaming service, the company has formed an alliance with Tencent in China to launch START, a cloud-based gaming service.
But in addition to gaming, there are multiple other drivers.
Take Data Center, for instance. Nvidia outbid Intel and paid $6.9 billion for the purchase of Israeli data center company Mellanox. The deal finally got the green light from the Chinese authorities this week and should further enhance its Data Center capabilities.
“The integration of the two companies enhances NVDA’s ability to combine compute offload/acceleration, which is NVDA’s core expertise, with high-speed interconnectivity, which is Mellanox’s expertise, to meet the needs of high-performance applications used in AI, machine learning, and data analytics,” Feinseth noted.
Moreover, Nvidia’s technology has positioned the company at the center of industries increasingly reliant on AI and deep learning, such as the automotive sector and healthcare; Nvidia’s high-speed GPU capabilities are contributing in the fight against COVID-19 and it has made its Parabricks genome-sequencing software available (which makes use of Nvidia’s GPUs) for researchers trying to sequence the COVID-19 genomes.
Sealing the deal for Feinseth, is Nvidia’s exemplary balance sheet. “As of January 2020, NVDA had $10.35 billion, $16.91 per share, in excess cash, which along with our expected Economic Operating Cash Flow (EBITDAR) generation of $7.74 billion over the NTM, will enable it to continue to fund R&D and strategic acquisitions,” Feinseth concluded.
Accordingly, Feinseth reiterated a Buy on Nvidia, without suggesting a price target. (To watch Feinseth’s track record, click here)
Feinseth’s endorsement gets the Street’s backing. Nvidia’s Strong Buy consensus rating is based on 26 Buys, 4 Holds and 1 Sell. The average price target comes in at $306.14 and implies a modest upside of 6%. (See Nvidia stock analysis on TipRanks)
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