Daily Management Review

2017 brought success to NVIDIA, and this is not the end


12/26/2017


Any investor following the technology sector knows about NVIDIA Corporation. The manufacturer of predominantly graphic gaming processors has applied its developments in artificial intelligence (AI) systems, data centers and autonomous vehicles. The potential on each of these markets is huge, so the combination of excellent performance of the company this year with long-term prospects led to an impressive increase in the value of shares. Let's look at some of NVIDIA's achievements in 2017 and think about why the company expects a huge growth in the future.



Hyins
Hyins
A surprising rise in prices

At the end of 2016, no one would have thought that in 2017 NVIDIA shares were expecting such a rapid growth, because in a year after their value increased by almost 224%. However, this year the company's papers added another 80%. Quotes of NVIDIA continue to grow for two main reasons: quarterly indicators remain good throughout the year, and investors are optimistic about the prospects in the field of AI and self-managed cars. For the first time the company's shares soared after the publication in May of the results of the first quarter of 2018 fiscal year. Sales increased by 48%, to 1.94 billion dollars, profit jumped by an astonishing 144%, to $ 507 million. Sales in the data center segment nearly tripled. Quarterly results shocked investors, and shares rose 38%. Growth continued for most of the year, especially after the results of the third quarter. Revenue increased by 32%, net profit increased by 55%, earnings per share jumped by 66%, surpassing management's estimates. It is also worth mentioning that NVIDIA outperformed analysts' forecasts in each quarter of this year.

Constant search for new opportunities

As already mentioned, this year the revenue in the segment of data processing centers has increased significantly, and development in other areas has also proceeded at a rapid pace. The third generation of computers for unmanned vehicles, called Pegasus, was introduced. They are 10 times more powerful than the previous model and allow engineers to develop fully self-controlled cars. Previously, NVIDIA signed several agreements with major automakers, this year two more companies were added to them. Today, the automotive segment is responsible for approximately 5% of NVIDIA revenue. According to management's forecasts, by 2025 it will bring the company up to $ 8 billion.

Surprisingly, the company's gaming business is steadily developing even against the backdrop of growth in other areas. In the third quarter, revenue in the segment jumped by 25%. The huge advantage of NVIDIA in comparison with AMD means that the company can expect excellent results in the next year. 

Expensive, but growing 

Currently, the price ratio to NVIDIA's forward profit is 40. In other words, the company's shares are quite expensive compared to the shares of other representatives of the technology sector. To justify the high assessment, NVIDIA is bound to grow rapidly. However, given recent achievements in increasing revenues and profits, it, perhaps, will be able to convince even the notorious pessimists in their ability to achieve this.

source: fool.com






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