NVIDIA Corporation

 

NVDA Details
 
NVDA Strengthens Foothold in Gaming GPU Space with New Launches: NVIDIA Corporation (NASDAQ: NVDA) is involved in providing graphics chip processors & related software services for a wide range of visual computing platforms. The company is a behemoth in visual computing technologies and the manufacturer of GPUs. On 2 April 2020, the company unveiled notebook versions of its high-end RTX 2080 Super and RTX 2070 Super GPUs, in a view to make more money in the era of increased demand for laptops and gaming hardware due to COVID-19 led global lockdown. 
 
NVDA Proposals COVID-19 Researchers Free Access to Parabricks: On 27 March 2020, the company announced that it is sharing its tools and technology with researchers, who are working to fight the coronavirus crisis. In doing so, the company offered researchers a 90-day free access to Parabricks, a GPU-enhanced genome toolkit. With the latest move, NVDA remains in pace with other technology company that are aiming to curb the spread of the COVID-19 virus.
 
Other Recent Updates:In another update, the company stated that it has acquired SwiftStack, data storage software firm, to provide customers with enhanced AI and ultra-speed computing techniques. Financial terms of the purchase were undisclosed. This buyout comes at a time when NVIDIA’s $6.9 billion purchase of Mellanox Technologies wait for a nod from China.
 
4QFY20 Key Financial Highlights: During the period, the company reported revenues of $3,105 million, up 41% year over year. Non-GAAP earnings for 4QFY20 stood at $1.89 per share, up 136% year over year. The bottom-line also soared by 6% on a quarter over quarter basis. In 4QFY20, revenues from GPU increased 40% on pcp and came in at $2.77 billion. Revenue from Tegra Processor business stood at $331 million, up 47% year over year. During the period, non-GAAP gross margin expanded 940 basis points (bps) on pcp and came in at 65.4%, depicting the enhanced impact of Data Center products and lower inventory charges in Gaming. Non-GAAP operating income stood at $1.22 billion, up 155% on pcp. At the end 26 January 2020, the company’s cash balance stood at $10,897 million, with debt amounting to $1,991 million.
 

4QFY20 Key Highlights (Source: Company Reports)
 
Outlook: For 1QFY21, NVDA expects revenue to be ~$3 billion (+/-2%). This forecast comprises a $100 million unfavorable impact of the coronavirus threat. The company expects non-GAAP gross margin to be between 65-65.4% (+/-50 bps) in the coming quarter. Non-GAAP operating expenses are likely to be in the range of $835 million to $1.05 billion. Capital expenditure is expected to be around $150-$170 in 1QFY20.
Valuation Methodology: Price to Cashflow Multiple Based Valuation 

Price to Cashflow Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of NVDA closed at $280.84 with a market capitalization of $171.9 billion. The stock made a 52-week low and high of $132.60 and $316.32 and is currently trading towards the upper band of the trading range. The stock has delivered a decent return of ~49.4% in the last one year. Looking at the 1-month price movement, the stock has gained ~43%, outperforming the broader indices. The company further expects data-centers to continue its growth impetus in the coming quarter. We have valued the stock using P/CF multiple based illustrative relative valuation method and arrived at correction of higher single-digit (in % terms). For the purpose, we have taken peers like Intel Corp (NASDAQ: INTC), Texas Instruments Inc (NASDAQ: TXN), Advanced Micro Devices Inc (NASDAQ: AMD), to name few. Considering the fundamentals, returns on the stock, current trading levels and valuation, we are of the view that most of the positive factors have been discounted at the current levels. Hence, with this view, we suggest investors to book profits and give a “Sell” recommendation on the stock at the current market price of $280.84, down 1.1% on 15th April 2020.

 
NVDA Daily Technical Chart (Source: Thomson Reuters)

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