5 Reasons To Add NVIDIA (NVDA) Stock To Your Portfolio Now

Shares of NVIDIA Corporation (NASDAQ:NVDA) have been performing well of late. This Zacks Rank #1 (Strong Buy) stock has gained a whopping 51.3% on a year-to-date basis. You can see the complete list of today’s Zacks #1 Rank stocks here.

If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock as it looks promising and is poised to carry the momentum ahead.

Factors Working in Favor of NVIDIA

Estimates on the Upswing

We note that earnings estimates for NVIDIA have displayed a healthy uptrend. For 2018, all the three estimates moved up in the last 30 days, with the Zacks Consensus Estimate rising roughly 16.9% to $3.60 per share. The Zacks Consensus Estimate for 2019 also climbed 11.5% to $3.87.

Stellar Q2 Earnings

NVIDIA reported splendid second-quarter fiscal 2018 results, wherein it not only delivered a strong year-over-year improvement, but also came way ahead of the Zacks Consensus Estimate.

This California-based graphic chip behemoth posted adjusted earnings (including stock-based compensation but excluding other one-time items) on a proportionate tax basis of 92 cents per share, handily beating the Zacks Consensus Estimate of 61 cents. Further, adjusted earnings increased from 44 cents reported in the year-ago quarter.

Revenues not only surged 56.2% year over year to $2.230 billion, but also comfortably surpassed the Zacks Consensus Estimate of $1.948 billion, as well as management’s projection of $1.95 billion (+/-2%). The year-over-year jump is primarily attributable to growth across all the platforms, namely, the GPUs gaming platform, Professional Visualization, datacenter and Tegra automotive platforms. Additionally, NVIDIA continued to gain strength in the artificial intelligence (AI) space, which positively impacted the revenues.

Positive 3Q View

The company provided encouraging fiscal third-quarter revenue guidance in second-quarter conference call, which was well above the Zacks Consensus Estimate at that time. For third-quarter fiscal 2018, NVIDIA expects revenues of approximately $2.35 billion (+/-2%), which was much higher than the Zacks Consensus Estimate of $2.14 billion.

Ahead of the Industry

The stock has been clocking solid returns in the last one year and has gained 159.3%, significantly outperforming the industry's gain of 30.5%.

Other Factors Driving Growth

The company’s sustained focus on introducing fast and innovative products, as well as entering into agreements with leading PC game makers, has been driving Gaming GPU business. Further, it recently introduced Max-Q design standard, which will help in making thinner, quieter and faster gaming laptops. Moreover, NVIDIA joined forces with Activision (NASDAQ:ATVI) and Bungie to bring Destiny 2 online-game to the PC for the first time.

Furthermore, the company’s Volta-based V100 accelerator was the most notable launch in the quarter. The Volta V100 GPU provides 10 times more deep learning power to the company’s year-old predecessor, Pascal generation GPUs. Recntly, NVIDIA shipped a number of V100 GPU production units and per the company, it is currently supporting the industry's two most common AI frameworks – Alphabet’s (NASDAQ:GOOGL) Google TensorFlow and Facebook (NASDAQ:FB)'s Caffe.

Increasing demand for cryptocurrencies owing from increased adoption of Bitcoin and newer technologies like Ethereum also aided in the rising of demand for GPU, consequently contributing to the company’s GPU sales growth.

Notably, in the last reported quarter, the company entered into a wide range of partnerships based on its AI technology, including Baidu, Foxconn, Inventec, Quanta, and Wistron. Demand for NVIDIA’s DGX AI supercomputer also remained high as more organizations are keen on building AI-enabled applications. The company has shipped the system to over 300 customers, so far, and more than 1,000 are in the pipeline. Notably, per NVIDIA, Facebook is using its 128 DGX system.

The company continued to witness solid momentum in its GRID graphics virtualization business. Moreover, the company won several contracts, but the deal with Amazon’s (NASDAQ:AMZN) Amazon Web Services was the most remarkable. Per the company, AWS’s G3 instances now run on NVIDIA Tesla (NASDAQ:TSLA) GPUs.

Bottom Line

Given that the company’s long-term earnings per share growth rate is 10.3% and has a market of $98.26 billion, we believe that the stock has much upside potential.

Keeping these positives in mind, we feel NVIDIA is one such technology stock that deserves a place in investors’ portfolio.

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