This Weeks Free Stock Pick - Investing in Computer Graphics Earnings Growth
NVIDIA (NASDAQ:NVDA) was the top performing large-cap semiconductor stock of the fourth quarter, with a stunning 60%+ move higher since their Q2 earnings report in early August.
And tonight at the International Consumer Electronics Show (CES) in Las Vegas, the company is likely to reveal further insights into their plans to stay hot on technology investor radars in 2016. In fact, they announced on New Year's Eve that they plan to unveil new technology for self-driving cars.
Largely known for its video gaming chips, here's how the company describes their focus...
Since 1993, NVIDIA has pioneered the art and science of visual computing. With a singular focus on this field, the company offers specialized platforms for the gaming, automotive, data center and professional visualization markets. Its products, services and software power amazing new experiences in virtual reality, artificial intelligence and autonomous cars.
Earnings Momentum Leads to Price Momentum
So what drove the fantastic price move in NVDA shares in the past 5 months?
At Zacks, we know it all comes down to earnings momentum. And the way our proprietary model works every day, we consistently find the stocks that are about to move big.
Here's what my colleague Eric Dutram observed on November 16 when he featured NVDA as the Bull of the Day...
"NVDA just crushed earnings expectations for its most recent quarter, posting EPS of 40 cents a share compared to an estimate of just 25 cents per share. This follows up another tremendous beat for the company - NVDA beat by 136% in the previous quarter - and it shows us that this stock has been on fire as of late."
Those earnings beats definitely contributed some style points that helped NVDA maintain a Zacks #1 Rank. But at the core, it's always the upward Earnings Estimate Revisions (EER) from Wall Street analysts that move the needle the most for the top rank.
What made the stock a Strong Buy for Zacks and the rest of Wall Street was the rapidly rising estimates that took the current full-year consensus from $0.79 to $1.04 and next year's consensus from $1.17 to $1.35, representing 30% EPS growth.
Below is a visual of the upward turn in annual EPS estimates that precipitated the stock price advance...
The Future of Driving
I will be watching the live web stream of the NVDA presentation from CES tonight because I have a special interest in the revolutionary technology that will make our cars safer means of getting around.
While few of us want to give up driving our machines and hand over control to some Alphabet (NASDAQ:GOOGL) robo-driver, the evolution of smarter cars that can "see" for us, alert us to danger, and even step on the brakes when we're not paying attention, is just beginning.
My experience here revolves around the company Mobileye (NYSE:MBLY), which has partnerships with dozens of car makers and whose Advanced Driver Assistance Systems (ADAS) will be seen in hundreds of car models over the next 3-5 years.
The main driver for this trend is not because consumers necessarily want cameras that can keep them in their lane and greatly reduce all types of accidents. It's the statistics that show the dramatic rise in distracted driving and how something as simple as Automatic Emergency Braking (NYSE:AEB) can prevent tens of thousands of rear-end collisions per year, saving thousands of lives.
And while fewer of us want more regulation in our lives, I'll gladly take advanced technology that makes my car as smart as my other mobile devices and keeps other bad drivers from crashing into me and my family.