Tech stocks have always been one of the more difficult markets to predict. While a few big names produce consistent results, buying in before prices soar too high is tough. While giants like Apple have started to wane, the most reliable and profitable shares of Facebook and Amazon have become cost prohibitive.
If you’re looking to edge into a tech stock that has reliable earnings and huge potential to expand, consider NVIDIA. They have only recently risen to true dominance of their market, and they are looking to expand rapidly very soon. Here’s a quick breakdown of what is going right and wrong for NVIDIA.
Earnings
There are very few computer hardware manufacturers that consistently show profit growth. Among these, NVIDIA stands tall. Since 2014, the company has posted quarterly earnings per share (EPS) between $0.1 and $0.3 above estimates. Total EPS growth for the two year period has stayed above 30 percent.
These trends are mirrored by the quarterly revenue growth. Reported revenues have remained between $0.05 billion to $0.15 billion above analyst projections. This demonstrates a sustained revenue growth of more that 15 percent over the last two years. To put things in simpler terms, NVIDIA earnings are trending upward more reliably than their competitors. Even tech giants like Apple have not managed such reliable growth in the past two years.
Competition
NVIDIA’s most direct competition is from the other major graphics chip producer, AMD. To show how the two companies compete, AMD has posted EPS losses every quarter for the last year. Overall EPS has maintained a 33 percent loss for that time period.
AMD revenue is a similar story, with the latest quarter falling to $832 million, down substantially from a 2014 high of $1.44 billion. When it comes to graphics chip innovation, production and distribution, the only company with the means to directly compete with NVIDIA is AMD. Their downwards trend paves a clear road for NVIDIA to continue their compelling success.
Prospects
There are three major prospects pushing NVIDIA. First, they continue to be a leading innovator. As long as the company has existed, roughly one third of their revenue has been poured back into innovation.
While this has helped them corner the market in PCs and laptops, they still have ground to cover in mobile computing. Recent development has helped them establish a strong foothold, and it won’t be surprising to see them carve a dominant share of chip production for mobile devices in the next few years.
Perhaps more importantly, NVIDIA is the leading chip producer for virtual reality projects. As more companies push to make VR a mainstream reality, NVIDIA is poised to be the primary manufacturer of the chips needed to make the tech work. Closely tied to that, many companies are simultaneously applying VR breakthroughs to enhanced reality devices. This is expected to be an explosive market for government, military and consumer use.
NVIDIA’s second major prospect is tied to a recent partnership with Tesla. Tesla has made huge waves in pushing alternative energy and car innovations into global markets. The partnership between these two companies ensures that NVIDIA is poised to be the go-to producer of chips that will be integrated into both smart cars and energy infrastructure. Look to these companies to lead the way on effective self-driving vehicles.
NVIDIA’s third great prospect is in investing. Recent deals have supplied them with an estimated $1 billion in additional cash flow. They are investing heavily. Proper money management will help them secure additional resources for development, but it will also supply them with holdings that can further increase their financial stability.
Cons
It isn’t all rainbows and sunshine. NVIDIA is still a technology company, and that means volatility and setbacks are part of the game. The biggest current threats to NVIDIA’s consistent gains come in the form of lawsuits. Litigation is still ongoing with Qualcomm and Samsung. These lawsuits present the largest obstacle between NVIDIA and a dominant portion of mobile computing. Additionally, a loss in the courts will open them to counter suits which could take a chunk out of their liquid assets.
As with any tech company, there is always the chance of losing to unforeseen developments. Misreading trends or being late to the next great innovation can leave any computer hardware manufacturer behind; just look at Intel. That said, the threat of new technology is rarely a good reason to shy away from a strong investment. The long and short of it is that NVIDIA is strong and growing. They are one of the safest tech stocks in the business, and jumping in before their growth levels is probably a good idea.
Regards,
Ethan Warrick
Editor
Wealth Authority
