Nvidia’s Stock Taking Cues on News Flow, Intel Earnings on Deck

Nvidia (NASDAQ:NVDA) has had an interesting couple of weeks. Earlier this month, reports surfaced that A. Brooke Seawell, one of the Nvidia’s directors and a venture capital partner, plopped down $1.3 million to add to his holdings of Nvidia’s stock. This boosted sentiment for the stock on top of upgrades from brokerages like Wedbush Securities. Then, Qualcomm (NASDAQ:QCOM) came out with its S4 chip for mobile devices, touting its advantages over Nvidia’s clocking technique in its Tegra 3 processor, which raised questions on Nvidia’s outlook.

We don’t see this is as an immediate threat and believe that Nvidia’s Tegra 3 is best for the optimal functioning of the Anroid OS, but it points to the growing battle between Nvidia and Qualcomm. In separate news, Nvidia’s GPUs were selected to build the world’s most powerful supercomputer, demonstrating its power in high end computing.

Overall, we stand positive on the stock as we believe that Nvidia has potential to be successful in smartphones and to make inroads into CPU market where currently Intel (NASDAQ:INTC) reigns supreme with its project Denver. Our price estimate reflects possibility of this success in long term. We note that Intel’s earnings report tomorrow can help give us an update on this market.

See our Intel earnings preview note.

The risk to Nvidia’s stock primarily revolves around how successful its Tegra 3 will be in tapping smartphone market. The tablet market is booming but still small in comparison to PCs and mobiles. On the other hand, the smartphone market has vast potential but other established players are not going to give it away easily.

Our price estimate for Nvidia stands at $19.90, implying a premium of about 35% to the market price.

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