Nvidia (NASDAQ:NVDA) currently has several product lines that sell to many different markets: GeForce for the desktop environment; Telsa for the scientist community; Tegra for mobile devices such as cell phones and tablets like the Microsoft Surface, and Quadro for graphics professionals that use programs such as Autocad or Photoshop. They even have products in cars and for the military environment.
5 Quick-Pick Reasons To Buy Nvidia
1. Nvidia has exposure to the growing cell phone market and tablet market via its Tegra 3 chip. Nvidia has also won a slot in the Microsoft (NASDAQ:MSFT) Surface tablet that is set to undercut Apple (OTC:APPL) in price.
The world's largest software company, which announced its surprise foray into computer manufacturing in June, said it would sell a 32-gigabyte (GB), Wi-Fi only version of its tablet at $499, versus $599 for a comparable version of Apple's new iPad.
Microsoft's tablet, which is taller and slightly heavier than an iPad, will go on sale on October 26 as the company launches the new touch-friendly Windows 8 operating system.
and according to component suppliers in Asia:
Microsoft has placed orders to produce 3 million to 5 million of these tablets in the fourth quarter.
2. Nvidia has a very attractive cash position at $3.28 billion in cash and only a mere $20.24 million in debt. With Nvidia trading at $13.02 per share this puts Nvidia's cash per share at 40.6%. You read that right -- a full 40% of the stock is backed by cash.
3. Nvidia is in position to rake in a nice cash flow from future payments by Intel totaling $1.5 billion over the course of the next five years. Payments began January 18, 2011.
4. The company has an attractive PEG ratio at 1.08, a PE ratio of 17.25, and Forward PE of 12.24. Profit margin is 11.88%, while quarterly revenue growth (yoy) is sluggish at 2.7%. Quarterly earnings growth (yoy) is negative 21.5%, but should pick up, as Nvidia recently released a newest generation of graphics cards.
5. Nvidia wants to enter the server space via its Project Boulder:
Nvidia Corp. is reportedly working on an ultra high-performance system-on-chip based ARM architecture, which would challenge AMD Opteron and Intel Xeon microprocessors in the server space. The chip is called Project Boulder and it is designed by Nvidia's graphics-processing-unit team.
Nvidia is transitioning from a PC-centric company to a company focused on graphics and computing on several fronts -- PC, Mobile, Tablet, and just about any display you can name.
For the reasons given above, we view Nvidia as an attractive buy in the $11 to mid $13 range with a target exit at mid $14s for 50% of our Nvidia holdings. This allows us to profit on small jumps up and down while keeping a large core position to hold in the hopes of exiting in the high teens.