NVIDIA (NVDA) Has the Potential to Sustain Its Share Price Rally

NVIDIA Corp (NASDAQ:NVDA) shares are rocking over the last six months, supported by strong financial performances and its innovative technologies. In addition, recent upgrades have also added to the NVDA’s stock price rally. Jeffries recently upgraded NVIDIA’s stock price target from $80 to $95 a share.

Jeffries cites continuing strength in datacenter segment, opportunities in deep learning and a secular growth story driven by virtual reality could drive strong financial performances for the company in the coming days.

After posting record third quarter results and recent upgrades, NVDA shares surged almost 33% in the last month alone, extending its year-to-date rally to 185%. In the third quarter, the company reported record revenue, margin and earnings per share. Its revenue of $2 billion increased 54% year over year and increased 40% from the second quarter this year.

The company’s earnings per share also increased almost 89% to a record level of $0.83 per share over the last year period, thanks to a record gross margin of 59%. Strong growth in revenue and earnings were driven by its new Pascal GPUs, VR, self-driving cars and datacenter AI computing.

“We have invested years of work and billions of dollars to advance deep learning. Our GPU deep learning platform runs every AI framework, and is available in cloud services from Amazon, IBM, Microsoft and Alibaba, and in servers from every OEM. GPU deep learning has sparked a wave of innovations that will usher in the next era of computing,” said Jen-Hsun Huang, founder and chief executive officer.

The company is likely to generate record results for the full-year amid growing demand for its innovative technologies. Consequently, the company has also raised its guidance for the full year. In addition to strong financial performances, the company has also returned significant cash to investors through dividends and buybacks.

In the last nine months, NVIDIA returned $509 million in buybacks and $185 million through dividends. Following a record third quarter performance, the company has also increased its quarterly dividend by 22% to $0.14 per share. The company intends to return $1.0 billion to shareholders in fiscal 2017 and 1.25 billion in fiscal 2018. Therefore, NVIDIA’s stock price has the potential to sustain its momentum.

The author does not have any positions in the above mentioned companies.

Alexander is an analyst for EconomicCalendar.com who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.