The semiconductor industry enjoyed an excellent 2020, despite the pandemic. It has come out stronger and continues to enjoy the bullish run. California-based Nvidia (NASDAQ:NVDA) has enjoyed a top position in this industry over the past year. The company sells semiconductor components for artificial intelligence, gaming, automobiles, and data centers. In this article, I’ll outline what makes NVDA stock so compelling.
According to a report from Fortune Business Insights, the global market size for semiconductors stood at $513 billion in 2019 and it is estimated to grow at a CAGR of 4.7% and reach $726 billion by 2027.
The U.S.-China trade war slowed the growth momentum of the industry but it is slowly going back to normal with an increase in demand and sales.
NVDA stock has gained 136% in the last 12 months and it is currently changing hands at $513. I am bullish on the stock for its strong growth prospects and impressive fundamentals. NVDA stock is going to be in demand throughout 2021 and it will generate big returns for investors.
Stellar Fourth Quarter Results
Despite the pandemic, NVDA had a great fourth quarter in terms of revenue and growth. The sales increased by 61% in the quarter and the data center revenue increased by a whopping 97% from the previous year. The annual revenue increased by 53%.
The adjusted EPS stood at $3.10, surpassing analyst expectations. The company has benefited from work from home and has made a strong mark in the gaming industry. NVDA is the largest chipmaker in the U.S. by market cap.
It is expected that the company will continue growing revenue in the coming year. Revenue of $5.3 billion is forecasted for the current quarter, which would show a 72% growth from the same period the previous year.
With a surge in demand for its graphic cards, it is possible that the company will cross $5 billion in revenue. It also pays a dividend and has a yield of 0.12%. With an increase in revenue, NVDA stock will see an upside and so will the dividend. It is a safe stock with a dividend payout.
NVIDIA Has Aced the Gaming Sector
It is not possible to talk about gaming without including Nvidia. According to Mordor Intelligence, the gaming GPU market will grow at 14.1% CAGR from 2021 to 2026. With a boom in the gaming industry, there will be stellar growth in the demand for GPUs and it will place Nvidia in a strong position in the industry. The company’s GPUs offers the best gaming experience with top-quality graphics.
The coming quarters will reflect strong demand for its GPUs, and the revenue from the gaming segment is expected to grow significantly. Despite the company’s GPUs being in short supply, the company has made $5 billion in Q4 and it can do so again. The company has a technical edge which sets it apart from its competitors. The growing demand for chips from Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) put the stock in a strong position in the industry.
Wall Street is also bullish on the stock. Bernstein analyst Stacy Rasgon has an “outperform” rating with a price target of $625. She cited the strong growth opportunity in the data center which could cross $50 billion. Rasgon is not alone. Out of 27 analysts on Tipranks, 23 have a buy rating and 4 have a hold rating with a price target of $649.
The bottom Line on NVDA Stock
There is no doubt that the company is doing very well. But it’s not stopping there. The acquisition of ARM from Softbank for $40 billion will increase its hold on the semiconductor industry. ARM currently supplies technology to the majority of NVIDIA’s competitors. It will lead to a rise in EPS and will take NVDA stock to new highs. This one certainly has long-term potential.
Bottom line? Add NVDA stock to your portfolio and take home massive gains. Buy the stock before it hits $600.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.