NVIDIA Hits 52-Week High - Analyst Blog

Shares of NVIDIA Corp. NVDA hit a new 52-week high of $19.61 on Jun 12, eventually settling at $19.52. The closing share price represents one-year return of 35.8% and 23.1% year-to-date.

Some of the optimism related to NVIDIA shares can be attributed to the higher adoption rate of the company's Tegra processors. Recently, Google (GOOGL) selected NVIDIA's Tegra K1 processor to power its Project Tango tablet development kit, which will help developers build applications featuring 3-D mapping and sensing capabilities.

Moreover, Xiaomi, a Chinese mobile manufacturer launched its tablet powered by TegraK1 processors. Additionally, NVIDIA's Tegra 4i chips are expected to compete with QUALCOMM QCOM. Tegra 4i is the company's 4G LTE mobile processor.

It is worth mentioning that, revenues from the Tegra processor business increased 35% year over year in the last reported quarter (first-quarter 2015) primarily due to higher sales of Tegra mobile devices and auto infotainment systems.  

Separately, NVIDIA recently extended its gaming alliance with Ubisoft to support the latter's most popular games such as Assassin's Creed Unity, Far Cry 4, The Crew, and Tom Clancy's The Division. This extended deal will help NVIDIA gain market share among gaming content developers.

We believe NVIDIA's innovative product pipeline that consists of the recently introduced SHIELD 2 and mobile processor Tegra K1 will boost top-line growth, going forward. Moreover, strength in gaming and high-end notebook GPUs is the other catalyst, going forward.

In addition, NVIDIA entered into a strategic alliance with International Business Machines IBM to produce GPU-accelerated editions of the latter's enterprise software running on its Power technology. The partnership provides NVIDIA a competitive advantage over Intel.

However, the continuous decline in PC sales is a cause of concern for NVIDIA's GPU segment. Competition from the likes of Intel and QUALCOMM and higher operating expenses are also expected to hurt profitability in the near term.

Currently, NVIDIA has a Zacks Rank #2 (Buy).