With the holiday season set to kick in, NVIDIA Corporation (NASDAQ:NVDA) could gain big this time around. Another reason to buy NVDA stock.
Shares of Jensen Huang led GPU giant NVIDIA Corporation (NASDAQ:NVDA) have been in a league their own with nearly 6x returns over the last two years. These massive gains have undoubtedly made NVIDIA stock the hottest stock in the market. NVDA stock has doubled for the year on the back of another stellar earnings release backed by strong topline and bottom line growth along with huge growth opportunities. Given the multiple new growth opportunities in front of the Santa Clara, California based chipmaker such as AI, autonomous driving, its core gaming segment still has massive growth potential. With holiday season kicking in, NVIDIA's gaming segment could once again set up the company for another blockbuster quarter suggesting more upside for NVDA stock. Let's take a closer look.
Nintendo tailwind could get bigger this holiday season.
In our earlier coverage, a fellow Amigbulls author had highlighted how the gaming segment has been driving NVIDIA stock with Nintendo tailwind playing a great role in that. Come this holiday season, the GPU major could be the biggest beneficiary due to Nintendo (OTCMKTS:NTDOY) sales. The Nintendo's Switch console is powered by a custom version of NVIDIA's Tegra X1 SoC (system on chip). Colette Kress, EVP & CFO during the latest quarter earnings call acknowledged stating: "Nintendo Switch console continues to gain momentum since launching in March and also contributed to growth." Now, if one goes by an NPD Group report, which suggests that Nintendo accounted for a remarkable 66% of video game hardware sold in the US in October with the Switch and Nintendo SNES Classic devices occupying the top two spots in the bestsellers list.
With the Nintendo consoles being powered NVIDIA chips, the industry trends, and experts commentary will come as good news for NVDA stock investors. The recent earnings call of Gamestop (NYSE:GME), a video game, consumer electronics retailer, had some useful insights. Gamestop interim CEO, Daniel DeMatteo in the call opined that "the retailer’s results have been driven by “continued momentum” from Nintendo’s latest hardware. The company has already made note that the demand for the product won’t be dying down anytime soon, and expects the system to sell strong through the next few weeks leading into Christmas." Further, GameStop COO Tony Bartel added that Nintendo Switch demand will be stronger than supply, and it also happens to be one of the most sought-after gifts for the holiday season. Nintendo Switch gaming console also features among Cowen and Co analysts favorite holiday gifts this season. Adobe Analytics which forecasts online sales this holiday season to reach $107.4 billion, up 13% YoY, also has Nintendo Switch and Super Mario Odyssey in its most anticipated gift items list.
There are also the likes of Joel Hruska of ExtremeTech who opines that the Switch could outsell the newly launched Xbox One X this holiday season. The good part for NVIDIA is that the Nintendo tailwind is likely to last longer. Nintendo in its latest quarter earning call had raised its sales forecast for Switch console, as it now expects to ship 14 million units in its FY ending March 2018, up from its previous estimate of 10 million. The Switch console maker also announced to ramp up its production of the console with its CEO, Tatsumi Kimishima stating that the company plans to ship between 25-30 million Nintendo Switch consoles between April 2018 and April 2019. These estimates bode very well for NVIDIA.
NVIDIA Stock: Still A Winner.
Despite doubling for the year, NVIDIA stock still looks good for more upside. The GPU maker makes the bulk of its revenue from its gaming segment and it is likely to continue as the major growth driver for next few quarters easily. With gaming trends looking good, NVIDIA gaming revenues are likely to swell further. The latest Jon Peddie Research report states NVIDIA increased its GPU market share by 30% in Q3 with gaming PC segment being the bright spot for the GPU market. Nintendo tailwind is only likely to further boost NVIDIA gaming revenues going ahead which came in at $1.56 billion in Q3, up 25% YoY and 32% QoQ. NVIDIA CEO Jensen Huang, in the earnings call, also remarked: "GeForce and Nintendo Switch are tapped into the strongest growth dynamics of gaming."
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