Shares of Nvidia (NVDA) are up 22 cents, almost 2%, at $12.48 after Nomura Equity Research’s Romit Shah raised his rating on the stock to Buy from Neutral, while maintaining his $16 price target, writing “enough is enough,” that the stock has an enviable 20% free cash flow yield based on its enterprise value, and trades at just one times sales, the same level where it bottomed in 2010.
“The market is not assigning any value to Tegra, in our view,” writes Shah, “considering $5 in net cash, Intel royalties ($1.00) and a graphics business that is conservatively worth $7-8 per share.”
The company’s fiscal Q1 results, to be reported Friday, will likely beat the consensus 9 cents a share in profit by a penny, Shah writes, on $915 million in revenue, just below the average $916 million estimate.
Shah sees 75 cents a share in profit this year, above the average 67 cents estimate, driven by share gains against Advanced Micro Devices (AMD) in graphics chips, as the company wins business at Apple (AAPL) and “other mainstream desktop and notebook platforms.”
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