NVIDIA Corporation: Pullback Gives Blue-Chip Stock Room to Run

NVIDIA Corporation Bullish After Strong Q4 Results

The current coronavirus pandemic (COVID-19) has taken the wind out of the sails of the global markets.

Right now, anxious investors searching for growth are focusing on so-called “stay at home” tech stocks. This is certainly a good idea, but it’s not a sure thing. The longer the coronavirus rages on, the greater the chances are for a recession.

Because of the uncertainty, the markets continue to seesaw back and forth. This chaos has put many once out-of-reach blue-chip stocks in excellent trading ranges. One of the most interesting of these is NVIDIA Corporation (NASDAQ:NVDA).

NVIDIA stock rose almost 15% in February, while the rest of the markets burned. It’s also up 62% year-over-year and roughly eight percent year-to-date.

This market-trouncing growth has been fueled by strong financial results. Most recently in the fourth quarter of fiscal 2020.

NVIDIA shares hit a record high of $316.32 on February 20, after reporting impressive fourth-quarter results on February 13. Fourth-quarter revenue was up 41% year-over-year and earnings per share were up 66%.

Despite hitting a new high, NVDA stock has, like the broader market, taken a hit. It’s currently trading approximately 20% below the February highs.

This actually gives NVIDIA stock plenty of room to run once the coronavirus pandemic has been contained. After all, NVDA was an excellent tech stock before the market meltdown, and it remains an excellent tech stock.

Chart courtesy of StockCharts.com

NVDA Stock Overview

What doesn’t NVIDIA Corporation do to help the modern world?

The company makes graphics processing units for the gaming and professional visual effects markets. (Source: “About Us,” NVIDIA Corporation, last accessed March 13, 2020.)

NVIDIA also manufactures system on a chip units for the mobile computing and vehicle navigation market. The Santa Clara, California-based gaming chip maker is also expanding its footprint in data centers.

NVIDIA’s products can be found on all sorts of devices, ranging from smart phones, to tablets, to notebooks, to workstations. Its deep-learning graphics processing unit has led to breakthroughs in artificial intelligence (AI) and has made supercomputing inexpensive and more widely accessible.

(Source: “NVIDIA Corporation (NVDA),” Yahoo! Finance, last accessed March 13, 2020.)

Strong Q4 Financial Results

On February 13, NVIDIA Corporation announced that revenue for the fourth quarter of fiscal 2020, ended January 26, 2020, had increased 41% year-over-year and three percent sequentially to $3.11 billion. (Source: “NVIDIA Announces Financial Results for Fourth Quarter and Fiscal 2020,” NVIDIA Corporation, February 13, 2020.)

The company reported fourth-quarter net income of $950.0 million, or $1.53 per share, a 66% increase over the $567.0 million, or $0.92 per share, recorded in the same period last year. This also represents a six-percent increase over the $899.0 million, or $1.45 per share, reported in the third quarter of fiscal 2020.

Adjusted earnings per share were $1.89, a 136% increase from $0.80 a year earlier and a six-percent increase from $1.78 in the previous quarter.

“Adoption of NVIDIA accelerated computing drove excellent results, with record data center revenue,” said Jensen Huang, founder and CEO. “Our initiatives are achieving great success.”

Full-year revenue slipped seven percent to $10.92 billion. NVIDIA reported full-year earnings per share of $4.52, a 32% drop from $6.63 a year ago. Adjusted earnings per share were $5.79, down 13% from $6.64 in fiscal 2019.

Huang also said the following:

NVIDIA RTX ray tracing is reinventing computer graphics, driving powerful adoption across gaming, VR and design markets, while opening new opportunities in rendering and cloud gaming. NVIDIA AI is enabling breakthroughs in language understanding, conversational AI and recommendation engines ― the core algorithms that power the internet today. And new NVIDIA computing applications in 5G, genomics, robotics and autonomous vehicles enable us to continue important work that has great impact.

All of this positions NVIDIA to capitalize on the greatest technology trends of our time.

Analyst Take

NVIDIA Corporation is one of the most reliable big tech stocks there is. But, because of the coronavirus pandemic, investors and hedge funds are selling NVDA stock. That’s good news for savvy tech stock investors who want to pick up beaten-down blue-chips for a bargain.