In the end, after doing a detailed analysis of what I felt were NVIDIA’s strengths and weaknesses, I’ve decided that it’s best to stay on the sidelines until the company’s future becomes clearer. To see how I arrived at this decision, click here to read my full report.
Sean’s take
NVIDIA has moved well beyond being just a graphics company, despite Wall Street’s instance on valuing the company as if its Tegra line of processing chips has no value whatsoever. In recent years, NVIDIA has managed to infiltrate a market dominated by Qualcomm’s Snapdragon processor in top-line smartphones – specifically Google Inc (NASDAQ:GOOG)’s Android OS – and Broadcom Corporation (NASDAQ:BRCM)‘s processors in lower-end 3G smartphones. Not only has NVIDIA jumped right in, but it’s having immense success, as is demonstrated by its 50% growth in Tegra chip revenue for smartphones and tablets in its most recently reported quarter.
The road ahead for NVIDIA won’t be easy, as it’s planning to move into a very crowded cloud-gaming sector with its Project Shield handheld gaming console set for release next year. It’s also still dealing with weakness from its graphics division, which is struggling with declining PC sales. Yet, for all of the concern directed at NVIDIA’s graphics segment, it still grew its market share to 65% last year.
When push comes to shove, NVIDIA’s amazing cash balance and innovation gives it an edge that I feel Wall Street simply hasn’t recognized and come to appreciate. I would be more than willing to support making a CAPScall of outperform at these levels. To read my thorough analysis of NVIDIA, click here.
Travis’ take
As Alex and Sean have pointed out, NVIDIA has a lot of upside if everything goes right. But let’s not forget that revenue was down sequentially last quarter, and it’s expected to be down again this quarter, so the trends aren’t exactly in the company’s favor.
I don’t like the declining trends in PCs or gaming consoles, and think Project Shield is a money pit if I’ve ever seen one. The flip side is the amazing balance sheet Sean points out. You can’t ignore $3.7 billion in cash, with no debt. The 4G LTE Tegra chips are also a huge upside but, as I said yesterday, I’m worried about market leader Qualcomm, as well as the immense capabilities of Intel Corporation (NASDAQ:INTC) encroaching on the market. NVIDIA is playing the role of David versus two Goliaths.
In the end, I’m taking a cautious approach, because I see too many challenges ahead in PCs, gaming, and tablets. Assuming fantastic growth in the Tegra line is risky for investors and, if it doesn’t pay off, there’s still downside. And the bigger problem is that Tegra is the only major upside, so NVIDIA essentially has its eggs in one basket.
On a strictly value play, I’ll vote for a $11 limit buy, which is below the stock’s 52-week low. I think that gives enough downside protection to compensate for the risk I think NVIDIA’s business holds. Click here to read my detailed analysis of NVIDIA.
The article Analysts Debate: Is NVIDIA a Top Stock? originally appeared on Fool.com.
Fool contributor Alex Planes owns shares of Intel. Fool contributor Sean Williams has no position in any stocks mentioned. Fool contributor Travis Hoium owns shares of Apple and Intel. You can follow Travis on Twitter at @FlushDrawFool, Sean at @TMFUltraLong, and Alex at @TMFBiggles.The Motley Fool recommends Apple, Google, Intel, and NVIDIA. The Motley Fool owns shares of Apple, Google, Intel, and Qualcomm.
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