Why Canaccord Is Buying Nvidia's Long-Term Picture

• NVIDIA Corporation NVDA has seen a 48.63 percent increase in its share price year-to-date, which touched a high of $31.55 on November 6.
• Canaccord Genuity’s Matthew D. Ramsay has upgraded the rating on the company from Hold to Buy, while raising the price target from $30 to $35.
• Ramsay believes that the strength of the key drivers of the company’s recent robust results had been underestimated, as well as NVIDIA’s positioning in its key markets.

Analyst Matthew Ramsay believes that the company’s “transformation from a PC-leveraged GPU supplier to a diverse visual-computing company is nearing completion with growth and overall earnings power now driven by the company's four target growth markets.”

These growth markets include enterprise, gaming, HPC/cloud, and automotive, which now represent more than 85 percent of NVIDIA’s revenue. The key themes driving the company’s recent strong results include augmented/virtual reality, automotive display/control and eSports.

Ramsay stated the stock deserves its recent premium valuation, while mentioning that there could be upside to the consensus forecasts, driven by “deep technology moats” and multi-sector growth.

According to the Canaccord Genuity report, meetings with management show that “the broad applicability of parallel GPU computing and workload acceleration, NVIDIA's revenue per car potential long-term, and the strength of the CUDA programming ecosystem in professional visualization and HPC markets,” had been underestimated.

The October quarter results indicated robust progress in NVIDIA’s emerging growth businesses, with 44 percent year-on-year revenue growth in the GeForce gaming segment, driven by the strength in eSports and Maxwell GPUs. The Automotive segment reported record revenue, with 51 percent year-on-year growth.

NVIDIA continued to deploy GRID to its enterprise customers, while deep learning applications saw growing traction across various enterprise verticals.