Nvidia's Dominance In GPUs And Higher Tegra Sales Lift Outlook

Feb. 14, 2013 4:37 PM ETNVIDIA Corporation (NVDA)3 Comments
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Nvidia (NASDAQ:NVDA) registered 7% annual growth in its fiscal 2013 revenues while many of its competitors -- including Intel (INTC), AMD (AMD) and Texas Instruments (TXN) -- posted annual declines in their calendar 2012 earnings. At $1.1 billion, its Q4 2013 earnings declined by 8.1% sequentially though this represented 16.1% year-over-year growth on account of higher Tegra sales and its growing GPU business.

Despite macro headwinds and a sluggish PC market, fiscal 2013 was a record year for Nvidia as it reached $4.3 billion in sales and increased its gross margin to 52.3%, compared to 51.9% in fiscal 2012. Nvidia claims to have increased its GPU market share from 53% to 65% and its notebooks market share from 47% to 66% last year. It remains committed to investing in new growth opportunities and has a gamut of products that will sample in 2013 -- Tegra 4, i500 4G LTE modem and Project Shield.

With the increasing revenue contribution from the non-PC business segment and its dominance in the GPU market, we feel that Nvidia has strong fundamentals to support a higher valuation. Additionally, the company has a solid balance sheet with a strong cash position and no debt.

GPU Division Continues to Grow Despite a Sluggish PC Market

In March 2012, Nvidia launched its new Kepler graphics processing unit (GPU) architecture, which is the first architecture to include virtualization technology built right into the GPU. The company claims that Kepler is its most efficient GPU architecture to date, and the introduction of the same has translated into higher market share and margins. Despite flat global PC shipments, Nvidia's GPU revenue grew by 2% in its fiscal 2013.

Nvidia transitioned its Kepler architecture across its GPU portfolio and started shipping Kepler into its Quadro products last quarter, which translated into a 10% sequential

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