NVIDIA Just Hit It Out Of The Park...Again

Shares of NVIDIA Corporation NVDA climbed more than 11 percent in the pre-market hours on Friday after the company "hit it out of the park" with its solid quarterly results and guidance.

Driven by a strong demand from data center and auto markets, the company's first-quarter GAAP EPS of $0.33 was a penny better than the Street's expectations; $1.3 billion revenue also surpassed consensus estimate of $1.27 billion.

Wedbush analyst Betsy Van Hees maintains her Outperform rating and raised price target to $42 from $38.

Rating, Valuation And Justification

"We believe that valuation is no longer looking stretched here as we got the solid beat and raise that we were looking for and we expect the stock to continue to press higher driven by the same trends that drove NVDA's success in CY:15," Hees wrote in a note.

Related Link: Brean Adjusts NVIDIA's Fair Value Range To $35-$40

The company's second-quarter revenue guidance of $1.35 billion +/- 2 percent was well above the Street and Wedbush estimate of $1.28 billion. NVIDIA, which sees sequential growth in all business segments in the second quarter, also reiterated that it expects to return $1 billion to shareholders in FY17.

"We estimate at the midpoint of guidance ranges implied GAAP EPS is at about $0.37, well above the Street estimate of $0.33," Hees noted.

The analyst expects NVIDIA's growth in 2016 to come from "(1) pervasive and macro resilient growth in PC gaming, (2) increasing penetration rates and content in auto, and (3) improving product mix from continued growth in high performance GPUs and deployment of GRID."

For the second quarter, Hees raised her EPS/revenue estimate to $0.37/1.35 billion from $0.30/$1.28 billion. Consensus estimate calls for EPS of $0.33 on revenue of $1.28 billion.

The analyst also raised her full-year EPS/revenue view to $1.56/$5.56 billion from $1.36/$5.33 billion. The Street expects earnings of $1.47 a share on revenue of $5.34 billion.

Shares of NVIDIA closed Thursday's regular trading session at $35.57. In the pre-market hours, the stock gained 7.9 percent to $38.39.