NVIDIA Poised for Success
- By Akshansh Gandhi
NVIDIA (NVDA) performed surprisingly well in 2016, as the stock railed over 225%. The primary reason behind the company's upward movement in 2016 was the strong performance of its graphics processing units (GPU) as well as Tegra business. The launch of its new GPU architecture "Pascal" was a great win for the company.
The company's Pascal-based graphics cards are designed to perform parallel calculations that result in faster, smoother motion in game graphics. NVIDIA lost 10% of its market share to its rival Advanced Micro Devices (AMD) in 2016, but still holds a leading position in the GPU industry with 70% market share. Despite losing market share, NVIDIA managed to report robust first, second and third quarter results in 2016.
Warning! GuruFocus has detected 5 Warning Signs with KFS. Click here to check it out.
The intrinsic value of NVDA
In the prior quarter, the company generated 62% of its overall revenue from its gaming segment, which came in at $1.24 billion. Moreover, that figure represents an increase of 35% year over year. The increase in gaming revenue clearly suggests it is moving in the right direction.
On the other hand, the company also launched Pascal-based graphics cards for notebooks, which helped it generate additional revenue and maintain its lead in the GPU industry.
Most significantly, the company recently introduced its new PC revival kit. The company said these kits include all the essential pieces to upgrade a traditional PC to support the latest high-end graphics games.
NVIDIA's PC revival kit along with its game streaming service, GeForce NOW, targets the large potential audience who do not play games regularly or have not played PC games at all. On the groundwork of GeForce NOW, the company has developed a high-end gaming PC in the cloud, which requires a high-speed and reliable internet connection.
GeForce NOW permits users to play the latest games on a GeForce GTX virtual gaming PC. NVIDIA has made a smart move by introducing its GeForce NOW platform, but the only thing that will serve as a barrier is the need for high-speed internet connection.
Regardless of the connection problem, GeForce NOW has enough potential to appeal to many PC owners in a progressively rising PC gaming market.
Apart from this, one of the company's segments that reported triple-digit growth was its Data Center business, which turned out to be its best-performing segment for the year. Hopefully the growth in this segment is just getting started and will continue on its upward journey.
Final words
NVIDIA surprised investors in 2016 by rewarding them with huge returns. After rising more than 200% in 2016, the company still has a lot of upside potential. NVIDIA is putting in a lot of effort to gain a strong hold in the self-driving car market.
Apart from this, the company is also focusing on the virtual reality market, as VR is projected to grow at a rapid pace in the coming years. All in all, NVIDIA is a good stock to hold for long-term benefits.
Disclosure: No position.
Start a free 7-day trial of Premium Membership to GuruFocus.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 5 Warning Signs with KFS. Click here to check it out.
The intrinsic value of NVDA
