Nvidia Remains One Of The Most Exciting Growth Stories In Tech

Commenting on NVIDIA Corporation NVDA's fourth-quarter results, Jefferies termed the company as one of the most exciting growth drivers in tech. The firm believes the 55 percent year-over-year revenue growth marked the second derivative peak, while it sees the 200 percent growth in datacenter business and improving gross margin as reinforcing its thesis that the company is emerging as the de factor standard in Artificial Intelligence.

The firm said, "Our sense is that many have missed the NVDA run and want to buy. We now estimate $6.50 of earnings power in 3-years."

Q4 Headline Numbers

Analyst Mark Lipacis noted that the company posted its seventh consecutive earnings beat. Fourth-quarter revenues of $2.17 billion were ahead of the $2.10 billion consensus estimate. The analyst said the earnings per share outperformance ($0.99 vs. consensus estimate of $0.83) was driven by slightly better gross margins and in-line operating expenditure.

Data Center To Eclipse Gaming Over Long Term

Analyzing segmental performance, Jefferies noted that data center sales of $296 million (205 percent year-over-year growth) accounted for 14 percent of sales, making it the second largest business behind Gaming. While noting that broad scale deep learning deployment is still in its early stages, Jefferies said it expects data center sales to eclipse gaming sales over the long term.

Pascal To Contribute To Upside Surprises In Gaming

On the gaming segment, Jefferies noted that sales of $1.35 billion, accounting for 62 percent of total sales, rose 66 percent year-over-year and 8 percent sequentially. This, the firm noted, was achieved in Pascal's second full quarter since launch. The firm now believes Pascal would lead to increased visibility and contribute to upside surprises. That said, the firm conservatively estimates revenue growth of 18 percent year-over-year, down markedly from 44 percent growth in 2017.

Reiterating Buy Rating

Jefferies reiterated its Buy rating on the shares of Nvidia and it has a $140 price target, up from its previous target of $125. The firm views slower PC Gaming growth and competition from Intel Corporation INTC and Advanced Micro Devices, Inc. AMD as posing downside risks and faster adoption of DL applications in datacenter and auto as upside risks.

At the time of writing, Nvidia shares were down 2.38 percent at $113.61.