I have been very bullish on NVIDIA (NVDA, Financial) over the past few months. However, NVIDIA has surpassed even my expectations. The stock has continued to move higher, despite lofty valuation. However, seeing its quarterly results, it is not surprising that NVIDIA is trading near 52-week highs.
Robust Second Quarter
Recently, NVIDIA reported its second quarter results. The company shared record revenue of $1.43 billion, a surge of 24% year-over-year and 9% sequential. The company also shared its operating income surged 6%, while its operating income grew 65%. Furthermore, the company’s net income and diluted earnings per share grew 65% and 56% on a year-over-year basis, respectively.
NVIDIA’s huge success was mainly possible due to the launch of its new Pascal architecture. The company also gained an advantage from both the meandering adoption of deep learning as well as the growing engagement with hyperscale data centers around the globe.
The company’s GPU business escalated 25%, to $1.2 billion from the same quarter a year prior. The Tegra Processor Business surged 30%, to $166 million. With each passing quarter, the revenue generated by the company’s four platforms is increasing. In the second quarter, the company's four platforms contributed around 89% of revenue, up 4% from a year before.
The company is performing very well and the graphics cards based on its new architecture are highly efficient. Keeping in mind the company’s second quarter results, it can be said that the company is poised to grow further in the imminent quarters.
New and Advanced Titan X
NVIDIA has delivered three new graphics cards- GTX 1060, GTX 1070 and GTX 1080. However, the company is now on its way to deliver its graphics card monster, the Titan X. As per testing performed by TechPowerUp, the Titan X is around 31.5% faster than GTX 1080 in games at resolutions of 3840 by 2160.
This new graphics card is considerably more efficient than GTX 1080, but it is more expensive. NVIDIA has priced Titan X at $1,200. These types of products, which are expensive, never make up a massive portion of the company’s unit shipments. That being said, it will have a positive impact on NVIDIA’s margins and there are gamers who are willing to pay for the absolute performance graphics cards, a market that may be bigger than expected.
Conclusion
Given NVIDIA’s strong quarterly results, I am still bullish on the stock going forward. Although with a P/E of nearly 50, the stock may look a bit expensive, I think it can continue moving higher.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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