The 4 Sources of Value for Nvidia’s Stock
Nvidia (NASDAQ:NVDA) has been making moves to establish a greater stronghold in the computing and graphics market. With its push into PC CPUs, Nvidia looks to take Intel (NASDAQ:INTC) and AMD (NYSE:AMD) head on, on their own turf. And the company is also taking on the mobile computing market. With the launch of the world’s first dual core mobile processor and recent acquisition of Icera, Nvidia is challenging players like Qualcomm (NASDAQ:QCOM) and Texas Instruments (NYSE:TXN).
We maintain a price estimate of $21.25 for Nvidia, implying a premium to market price.
With Nvidia getting more ambitious with its plans, this article is aimed at helping understand the 4 sources of income that contribute to Nvidia’s stock value.
1) Professional Graphics Cards – represents 34% of the company’s stock value
Nvidia sells professional graphics cards to professionals who require superior graphics performance from their computers. Such performance is required for several key applications pertaining to a wide variety of business sectors like architecture, energy, construction, real estate, and engineering.
See the top forecasts for professional graphics cards
2) Discrete Graphics – represents 20% of the company’s stock value
Nvidia sells discrete graphics cards that are used in both desktops and notebooks, to offer a superior graphics performance compared to integrated graphics chips that come with most PCs. The primary buyers include gaming enthusiasts.
See the top forecasts for discrete graphics cards
3) Mobile & Game Console Computing Chips – represents 13% of the company’s stock value
Nvidia sells computing chips to manufacturers of mobile devices like smartphones, portable media players and gaming consoles like Sony’s PlayStation. This is a fast growing market but offers lower revenue per unit potential than traditional PCs.
See the top forecasts for mobile & game console computing chips
4) PC CPUs – represents 11% of the company’s stock value
Nvidia does not sell microprocessors for PCs yet, however it has announced that it will be entering this market soon. It is likely that Nvidia will start selling PC CPUs by 2013 and gain some share at expense of Intel and AMD (although this won’t be easy).