Some thoughts of Nvda
Nvda
NVIDIA (NASDAQ: NVDA) shares are trading higher today after the company reported a first-quarter profit of $176.8 million, or 30 cents per share. Although the adjusted profit of 36 cents per share missed analyst estimates of 38 cents per share, a few analysts upgraded NVDA saying margin growth and new products should improve NVDA’s prospects through the year. If you think that the stock won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NVDA. 3
However, since NVDA is priced really really low, it could still be a good time to start buying now. It is near impossible to predict the absolute bottom. 2
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NVDA hasn’t been below $17.50 by more than a few cents at all in the past year and has shown support around $22 recently. This trade could be risky if the company’s next earnings (due out in mid-August) disappoint, but even if that happens, this position could be protected by the support the stock might find from its 50-day moving average, which is currently around $20. 6
Management is very competent, CEO was a chip designer himself. Main competitor AMD has hit a rough patch and is too busy bleeding cash to make ATI competetive. Not too mention, low stock price makes it attractive buyout target, especially given its market postition & technological expertise. Given stalling semiconductor market, M&A could be attractive growth strategy. At a $121B market cap, Intel could easily absorb NVDA’s $6b (Keep in mind this could draw the Government’s attention). Invest in NVDA for the long term, but you may be able to cash out early if they are acquired. 1
In September, NVDA and the Burke Regional Committee completed the first phase of a two-phase Corridor Management Study. The study examined the effects of additional growth and development in the Burke Mountain area on the major transportation corridors in the region. 5
AMD is coming online with a new fab plant this year. They are currently running tests with it. With this new plant AMD will be able to take market share from Intel. Amd clearly has the performance advantage right now in the Desktop and Server market. The reason this is related to NVDA is because they supply the IO chips in the most popular and fastest motherboards for AMD. AMD will take NVDA for a ride in the next year to year and a half. After that Intel looks to have a better chance at catching AMD in performance. 7
NVDA has competent management. CEO Jen-Hsun Huang is a co-founder of the company, and was a chip designer. He owns 5.1% of the Nvidia (including options), and is known to be a demanding boss to work for. Before the latest stumble, Nvidia has historically taken great pride in never missing a production deadline. As the entire chip industry hits the thermal and power consumption bottleneck, it is likely that Nvidia will have to retool its chip designs, either going the Intel/AMD route and putting multiple cores on a single die, or the ATI route and putting multiple GPUs on a single card. Having a CEO who understands the technical complexities of this tricky transition is a big plus for Nvidia. 4
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