Like just about every sector in the market, tech stocks have not escaped the recent carnage. The month of May has been one of the worst for the markets since September 2011. However, as many investors now realize, when markets were hitting a low point in the later part of 2011, it was actually a fantastic time to buy cheap. Many investors who did buy ended up with very significant gains in just a few short months. One stock that could be poised to rise from recent lows is NVIDIA Corporation (NVDA). Here are 4 reasons why investors should consider accumulating this stock while it is trading at depressed prices:
1. Although the prospects for this company are very positive, NVIDIA shares have been indiscriminately sold off due to macro issues. This creates an opportunity to buy shares cheap, and benefit from the continued progress this company has made. NVIDIA designs and manufactures specialized graphic chips that are used in many electronic items like computers and smart phones. The world demand for technology is only likely to increase in the long-term and that means growth for companies like NVIDIA.
2. This company recently launched new products such as the "Tegra" chip for smart phones. It also recently released the world's fastest consumer graphics card, for use in specialized gaming computers. Furthermore, the company could benefit from a computer upgrade cycle which is likely to be driven by Microsoft's (MSFT) launch of Windows 8 in the next few weeks.
3. NVIDIA has long been a rumored target for a takeover and buyout talk has recently resurfaced. Many major tech companies have billions in cash on the balance sheet, which is generating very little returns for shareholders. It could make sense for a company like Intel (INTC) to buy NVIDIA now because of the new product launches, the strong chance for higher sales due to the Windows 8 upgrade cycle, plus the stock is depressed now and that makes a buyout offer more affordable. An analyst at Nomura Securities recently rekindled takeover talk for NVIDIA, citing Intel as a possible suitor. Intel has the balance sheet to make an acquisition and it has a history of buying other companies.
4. Even without a buyout offer, some analysts see gains of about 60% for this stock. Analysts at Needham & Co., believe the stock is way below fair value and set a $20 price target based on higher growth prospects and a sum-of-the-parts calculation on the company's value.
Key Data Points For NVIDIA From Yahoo Finance:
- Current Share Price: $12.43
- 52-Week Range: $11.47 to $19.31
- Dividend: none
- 2012 Earnings Estimate: 72 cents per share
- 2013 Earnings Estimate: 94 cents per share
- P/E Ratio: about 14 times earnings
Key Data Points For Intel From Yahoo Finance:
- Current Share Price: $25.84
- 52-Week Range: $19.16 to $29.27
- Dividend: 84 cents which yields 3.2%
- 2012 Earnings Estimate: $2.50 per share
- 2013 Earnings Estimate: $2.69 per share
- P/E Ratio: about 10 times earnings
Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.