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Should You Buy Nvidia (NVDA) Stock Before 2018?

Benjamin Rains
Technology stocks dominated the news in 2017, as massive gains from the likes of Amazon (AMZN), Facebook (FB), and Alphabet (GOOGL) helped lift markets and indexes to new highs throughout the year. Now, as we approach the New Year, investors begin to look to the next big section of the economy poised to boom in 2018.

Technology stocks dominated the news in 2017, as massive gains from the likes of Amazon AMZN, Facebook FB, and Alphabet GOOGL helped lift markets and indexes to new highs throughout the year. Now, as we approach the New Year, investors begin to look to the next big section of the economy poised to boom in 2018.

However, before investors search high and low for an industry or sector that will take off in 2018, they might be better served by simply deciding to stay put in tech.

Much has been written about the fact that tech stocks have grown at a pace not seen since the Dot Com surge of the late 1990s. But the “Dot-Com bubble” burst because tech company valuations soared without the necessary sales and profits to support the climb.

Investors should begin to curb those fears because this market surge is based far more in reality. Tech companies big and small are turning profits and growing their sales, as nearly every sector of the economy—retail to automotive—begins to rely more and more on new technology (also read: One Big Reason Why Tech Stocks Are Not In the 'Dot-Com Bubble').

For example, the semiconductors industry is poised to keep on growing as connected devices proliferate, data centers expand, and artificial intelligence becomes the norm.

With that said, let’s take a look at one well-established technology stock that stands to benefit from delivering the speed, quality, and memory capacity needed to drive this internet connected age forward.

NVIDIA Corporation NVDA

This semiconductor power transformed into a Wall Street darling a few years ago, with 2017 marking its official welcome to the A-list. Nvidia is currently a Zacks Rank #1 (Strong Buy).

Shares of Nvidia have soared nearly 76% since the start of the year, driven in part by the company’s ability to crush earnings estimates—topping our Zacks Consensus Estimates by over 25% in the trailing three quarters. This trend seems destined to continue for the semiconductor company, which specializes in graphics processing units for the booming computer gaming industry.

Based on our current Zacks Consensus Estimates, Nvidia is expected to finish the current fiscal year with earnings growth of 63%. The company’s full-year sales are expected to hit $9.47 billion, which would mark a 37% year-over-year jump.

These growth projections come after Nvidia’s revenues popped 38% last year to reach a then company record of $6.91 billion.

Nvidia’s current cash flow growth of 123.57% crushes the “Semiconductor – General” industry’s average 9.45% growth. The company’s cash flow growth helps show that Nvidia is expanding its cash position and should be able to fund further innovations. On top of that, the company currently sports a “B” grade for Growth and an “A” for Momentum in our Style Scores system.

Clearly, Nvidia has expanded quickly. However, this rapid growth might worry investors, especially as they look to Nvidia’s high P/E ratio and expect the company to struggle with its valuation in 2018. But investors should note that a slowdown doesn’t look to be in the cards anytime soon.

Next Year

Nvidia is expected to close its current fiscal year on a high note, which could help the growing tech powerhouse jump into the New Year with some positive momentum. What’s more, this momentum is backed by strong 2018 projections.

Within the last 60 days, Nvidia has received eight upward earnings estimate revisions for its upcoming fiscal year against no downgrades. Based on our current consensus estimates, Nvidia’s revenues are expected to climb nearly 16% in its fiscal 2019, while its EPS is projected to grow 11.41%.

Looking even farther ahead, Nvidia’s expected EPS growth over the next three to five years currently rests at an annualized rate of 11.20%. This helps demonstrate that the company is projected to grow its bottom line for years to come, despite its stellar two-year run.

Bottom Line

Nvidia is known for its top of the line computer graphics chips geared towards gaming. However, the semiconductor company also manufactures chips for industries that are only starting to pick up steam, such as AI and deep learning technologies, driverless car tech, data centers, machine learning, and more.

But what might help tip the scales in Nvidia’s favor in the eyes of many inventors is the fact that the company’s stock price has dipped over 10% in the last 10 weeks—spurred by a recent industry-wide tech selloff. As of Tuesday’s close, shares of Nvidia sit over 14% below their 52-week high. Investors might not find a better time to buy Nvidia at this kind of discounted price for a long time.

Right now, we expect Nvidia to post its fourth-quarter fiscal 2018 earnings in early February 2018. Investors should mark this on their own calendars, as it could kick off another year of skyrocketing Nvidia shares.

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