I've been quite bullish on shares of Nvidia (NVDA) for quite some time. For the last several months, the stock has served as a nice ATM for traders - buy below $12 and sell around $14. However, after the last earnings report, coupled with attractive products and roadmaps in a number of key segments, the stock is now a "buy" at the most recent close of $13.30/share and an absolute steal under the $13/share level.
While I defer in-depth analyses of Nvidia's various product segments to future, more focused articles, there are a number of compelling reasons to buy Nvidia at these levels:
- Kepler Lineup Expansion: When Nvidia first released its "Kepler" high end GTX 680 card for desktops, it was well recieved, with much praise for its power efficiency. Over the last several months, Nvidia has expanded its 28nm "Kepler" lineup to cover notebook chips as well as to lower price segments on the desktop. This will improve Nvidia's competitive position against AMD (AMD), which has had 28nm graphics chips across its entire lineup for months. Margins should also be more attractive as 28nm "Kepler" chips due to the smaller die-sizes of the chips.
- Aggressive Presence In Mobile: Despite being up against a number of giants on the mobile side, most notably Qualcomm (QCOM), Nvidia has not shied away from aggressively pushing in the space. Tegra 3 was a hit that saw a good deal of high profile design wins, including the Google (GOOG) Nexus 7 tablet and Microsoft's (MSFT) Surface. Future iterations of the Tegra chips should be more aggressive on pursuing power efficient graphics performance, which should further differentiate the company's solutions.
- Valuation Is Attractive: With $3.28B in cash, no long term debt, and a market capitalization of $8.24B, the company itself is valued at 10.4x earnings ex-cash.
- Windows RT Launch: The release of Windows RT should be a positive driver for Nvidia going forward. In addition to the Surface win, Nvidia's solutions will be available to other OEMs looking to build Windows RT based tablets. With the rumored prices of the full Intel (INTC) Atom based Windows 8 tablets coming in north of $700, consumers may be willing to sacrifice backwards compatibility for more attractively priced Windows RT models.
- Compelling Tesla Products: In addition to the low power side of things with Tegra, Nvidia's push in the high end, high performance compute segment with its "Tesla" accelerators should see a nice jolt. Nvidia is planning to roll out its K20 accelerators based on an enhanced version of its "Kepler" architecture by the end of the year. These are high margin products that leverage the sweat equity invested into the consumer and mobile graphics spaces.
In short, I plan to add to my position in the company at these levels. For a more detailed look at the long thesis, I recommend the following resources:
- "Kepler And Tegra Will Drive Strong Peformance For Nvidia This Fall" by Adam Levine-Weinberg
- "Nvidia's New Offerings: Aiming For A Slice Of Intel And AMD's Pie" by Austin Craig
- My own, "Nvidia: Put The Fork Down, It's Not Done"
For an examination of the short side of the investment, I would recommend:
- "Put A Fork In It: Nvidia's Done" by Stephen Breezy