Why The NVIDIA Story Is Still In Its Early Innings Despite Recent Run

Loop Capital is bullish on NVIDIA Corporation NVDA given strong growth opportunities in gaming, automotive, artificial intelligence and deep learning.

Analyst's Commentary

Analyst Betsy Van Hees launched coverage on the stock with a Buy rating and $109 price target, saying its gaming business would benefit from the continued rise of eSports, traditional gamers, artificial reality (AR) and virtual reality (VR). For context, the gaming market accounted for 62 percent of NVIDIA’s third-quarter revenues.

“We see near-term growth drivers in the tradition gaming market driven by launch of new game titles that will spur gamers to upgrade to NVDA’s higher performance Pascal GPUs,” Van Hees wrote in a note.

Van Hees expects revenue from the gaming segment to increase more than 40 percent in FY 2017 and 25 percent in 2018.

Parallel Processing

Further, NVIDIA is the leading provider of parallel processing power with its Quadro and GRID products for data center and professional virtualization end markets. The analyst estimates the data center and professional virtualization end markets to rise more than 140 percent in FY 2017 and 25 percent in 2018.

Autonomous Driving

Another key growth driver for NVIDIA is likely to come from autonomous car market, especially from Tesla Motors Inc TSLA. Nvidia already supplies Tegra processors for infotainment for the automobile market and provides an end-to-end AI computing platform for autonomous driving.

“We expect given the long design cycles in the automotive market that NVDA will see solid growth in F2018 of 10+ percent YoY and 15+ percent YoY in F2019 and we expect considerable growth in F2020 and beyond,” Van Hees added.

Stock Performance

Shares of NVIDIA have surged more than 170 percent this year versus the 34 percent of the SOX over the same period. Van Hees sees potential for further upside due to impressive growth opportunities in various end markets.

At last check, NVIDIA shares had gained 1.79 percent on the day to $91.19.