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Nvidia is an American multinational technology that is credited with the invention of the graphics processing units for gaming.
The company is a pioneer in designing systems on a chip for accelerated computing, self-driving cars, and AI, and is a leader in fueling growth in manufacturing, transportation, healthcare, and other industries.
Strength
Nvidia’s Q2 2021 earnings report announced that NVIDIA RTX is featured in over 130 games and applications, including Minecraft RTX and Adobe (NASDAQ:ADBE) products.
The game-lag reducing NVIDIA Reflex ecosystem is supported in 20 games, including some of the major e-sports titles. The company also announced that it launched NVIDIA Base Command and Fleet Command, which simpliy the management of edge AI through a cloud service, which is transformative for many industries.
Furthermore, Nvidia also launched the NVIDIA Omniverse, a real-time 3D simulation and virtual collaboration platform.
Recent Results
For the second quarter of 2021, Nvidia reported revenue of $6.5 billion, showing gains of 68% from last year, and an increase of 15% from the first quarter.
Gaming revenue came in at $3.1 billion, showing an 85% growth from the previous year. This was driven by an exceptionally strong demand in the Gaming category that outstripped supply, and the introduction of GeForce RTX 3080 Ti and GeForce RTX 3070 Ti graphic cards.
The Professional Visualization sector also recorded second-quarter revenue of $519 million, showing an increase of 40% from the first quarter of 2021, and an increase of 156% from the previous year.
The company announced record Data Center revenue of $2.4 billion, which is up 35% from a year earlier. The Automotive category also showed a revenue increase of 37%, resulting in $152 million in revenue.
Nvidia has a positive outlook for the current quarter, where it expects its revenue to rise to an estimated $6.8 billion, and GAAP and non-GAAP gross margins to rise to 65.2% and 67%.
Valuation Metrics
Nvidia stock does not look particularly cheap or expensive here, as it is priced at a fairly high forward P/E ratio of 53.2x, but is also growing at a very strong clip.
Normalized earnings per share are expected to increase by 61.6% in 2022, and 11.8% in 2023.
Wall Street’s Take
From Wall Street analysts, Nvidia earns a Strong Buy analyst consensus, based on 23 Buy ratings, one Hold rating, and one Sell rating in the past three months. Additionally, the average NVDA price target of $237.27 puts the upside potential at 7.5%.
Summary and Conclusions
Nvidia is enjoying rapid growth, and has very strong support from Wall Street analysts. The stock is not extremely cheap, but is likely not extremely overvalued here either.
Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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