NVIDIA Corporation

NVDA Details

NVIDIA Corporation (NASDAQ: NVDA) develops discrete graphics processing units (DGPPUs) to enhance the user experience on computing platforms. The company's chips are used in many applications, including high-end gaming PCs, data centers, and automobile infotainment systems.

Latest News:

• Launch of Omniverse: On March 22, 2022, at Game Developers Conference, NVIDIA launched NVIDIA Omniverse™ features that allow developers to share assets, sort asset libraries, collaborate, and use AI to animate characters' facial expressions in a new game development pipeline, further enriching its game developer ecosystem.
• Quarterly Dividend: On February 16, 2022, the company declared a quarterly dividend of USD 0.04 per common share, paid on March 24, 2022, to shareholders of record on March 03, 2022.

FY22 Results:

• Growth in Topline: The company reported a YoY growth of 61.40% in revenue to USD 26.91 billion in FY22 (ended January 30, 2022) from USD 16.68 billion in FY21, driven by strong demand for NVIDIA computing platforms.
• Growth in Profitability: In FY22, NVDA's net income increased to USD 9.75 billion from USD 4.33 billion in FY21.
• Cash and Debt Position: The company had USD 21.21 billion in cash and cash equivalents as of January 30, 2022, and total debt of USD 10.95 billion.

Key Risk:

• Dependence on Third Parties: The company does not manufacture the silicon wafers used in its products, and it does not own or operate a wafer fabrication facility. Instead, it relies on industry-leading foundries to manufacture its semiconductor wafers using their fabrication equipment and techniques, such as Taiwan Semiconductor Manufacturing Company Limited and Samsung Electronics Co. Ltd. Instead of relying on independent subcontractors, it also does not assemble, test, or package its products directly. Any failure on the contractual obligation by these vendors could harm its operations.

Outlook:

• FY23 Guidance: As of FY22, NVDA expects FY23 net sales to be about USD 8.10 billion (+/- 2%), along with GAAP and non-GAAP margin of 65.2% and 67%, respectively. It expects to incur capital expenditure of USD 350 – 400 million.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

NVDA's stock price has fallen ~20% in the past three months and is currently trading close to the mid-band of its 52-week range of USD 134.59 to USD 346.47. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 341.65.

Considering the slight correction in the stock price, launch of omniverse, strong margins, positive outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 212.58, down 4.56% as of April 14, 2022.

1-Year Technical Price Chart (as on April 14, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.