The semiconductor industry is characterized by its technological advancements. More than 5,000 companies operate in it with approximately $150 billion in annual revenue.
The major players are Intel (INTC, Financial), Texas Instruments (TXN, Financial), Qualcomm (QCOM, Financial), MicronTechnology (MU, Financial) and Advanced Micro Devices (AMD, Financial). Let´s take a look at NVIDIA Corp. (NVDA, Financial), which operates as a visual computing company worldwide. It operates in two segments, GPU and Tegra Processor. The company is well-known in computer graphics chips.
The company has two important rivals: Advanced Micro Devices and Intel. With the first, it competes in the high-end graphics segment while with Intel the competition is in the low- to middle-tier segment. Despite this, NVIDIA’s focus is on graphics. But it also has experience in diversifying operations in the data center.
Moreover, in the automotive industry, it has a long-term driver because more and more cars are like computers. In the future, the company will have plenty of space to innovate in this field.
Automaker Volvo (OSTO:VOLV A)(OSTO:VOLV B) announced that new models will be 100% electric or hybrids. This determination will come into force two years from now; this way, Volvo will be the first one that sets a date to transition from traditional cars to new electric ones.
In the past few weeks, analysts at Mizuho Securities raised its price target from $145 to $170 while maintaining a Buy rating. Needham & Co. LLC also raised the price target but more dramatically to $200 from $130.
I always like to take a look at GuruFocus' Warning Signs. On the positive side, the company has an operating margin, which is in expansion, but there are three 4 medium warning signs. The dividend yield is close to a five-year low, about 0.36%. Further, the market price is close to a 10-year high as are the price-book (P/B) and price-sales (P/S) ratios. Its P/B ratio of 15.06x indicates a premium versus the industry average of 1.88x while the P/S ratio of 13.49x is well above the industry median of 1.75x. The P/B and P/S ratios are both close to 10-year highs.
At the end of March George Soros (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) initiated new positions in the stock. Jeremy Grantham (Trades, Portfolio) upped his stake by 448.84% in the trimester. On the other hand, Louis Moore Bacon (Trades, Portfolio) and John Burbank (Trades, Portfolio) sold out the stock.
Final comment
The company has competitive advantages among its rivals and NVIDIA's revenue growth sharply exceeded the industry average. Further, earnings per share showed improvement in the most recent quarter compared to the same quarter a year ago and has consolidated a pattern of positive earnings per share growth.
Disclosure: Author holds no position in any stocks mentioned.
