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12 pts

Opinion on NVIDIA Corp (NVDA) Sector: Technology > Industry: Semiconductors
NVIDIA Corp

Jul 04, 2008 12:11 AM UTC

Marian Filo

Return	Risk
-4.25%	LOW

Principal

Profile & Performance

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This pick is about: NVDA

Rating:	$12.7 (07/04/08)
Gain/Loss:	-36.61% in 102 days
Target:	$48.00 (+277.95%) in > one year
Allocation:	0.0% of portfolio

Analysts' Recommendation:	Buy
30 Days Ago:	Buy

Analysts' Target:	$27

Analysts' Targets
FTN Midwest	$19
Sell
Tuesday, July 01, 2008
FTN Midwest	$19
Sell
Tuesday, July 01, 2008
UBS Securities	$22
Hold
Thursday, June 26, 2008
Wedbush Morgan Securities	$25
Hold
Monday, May 05, 2008
Deutsche Bank Securities	$22
Underweight
Friday, April 11, 2008
Caris & Company	$24
Above Average
Friday, April 11, 2008
AmTech Research	$26
Buy
Monday, April 07, 2008
Citigroup	$23
Sell
Monday, March 24, 2008
BMO Capital Markets	$34
Underperform
Thursday, February 14, 2008
Needham & Co.	$39
Hold
Thursday, February 14, 2008

BusinessWeek Rankings

BusinessWeek 50

2008 #49

2006 #45

IT 100

2007 #36

2006 #73
NVIDIA Corporation provides visual computing technologies designed to generate interactive graphics on consumer and professional computing devices in the United States and internationally. It operates in four segments: Graphic Processing Unit (GPU), Media and Communications Processor (MCP), Professional Solutions Business (PSB), and Consumer Products Business (CPB). The GPU segment comprises products that support desktop and notebook personal computers, and plus memory products. The MCP segment consists of NVIDIA nForce core logic and motherboard GPU products. The PSB segment offers professional workstation products and other professional graphics products, including high-performance computing products. The CPB segment provides mobile brands and products that support handheld personal media players, personal digital assistants, cellular phones, and other handheld devices. This segment also licenses video game consoles and other digital consumer electronics devices. The company markets its products to original equipment manufacturers, original design manufacturers, add-in-card manufacturers, system builders, and consumer electronics companies. NVIDIA was founded in 1993 and is headquartered in Santa Clara, California.

Update 08/14:

NVDA

Pick-of-the-Week
Semiconductor Play in Graphics: NVDA
Brandon Clay

This is a difficult environment for short-term investors. When the Dow jumps up 200 points one day, and crashes 200 points the next, it’s hard to tell where to turn. Calling bottoms is nearly impossible. Every week brings more bad news in financials, which trickles into almost every other area. At present, Healthcare is the best place to put your money, but will it be the same next week? Stay tuned.

As for other opportunities, this week we turn our attention back to technology. Not in the broad sense, but with laser-focused precision. In this market, we have become value investors – seeking an inexpensive company that’s almost-undiscovered by mainstream investors – classic Warren Buffett-style investing. We’re not claiming his foresight, but we’re giving the Oracle his due. Value investing can be very successful, even in bear markets.

Technology is not typically known as a place for value. In fact, quite the opposite. Since the Tech crash, a shift has happened. Certain semiconductors have been hammered over the past several years – especially in the last 12 months. One of those, a leader in graphics chips, has been especially beaten down. NVIDIA Corporation (NVDA) fell from a 52-week high of $39.67 last October. The Santa Clara-based chip designer is now trading around $12.00 today. Did it really deserve the punishment the market delivered? We don’t think so.

In 2007, Forbes Magazine declared NVIDIA the Company of the Year. Understanding the hyper-competitive tech market, Forbes praised NVDA’s management for never becoming complacent. They bought out once-rival 3dfx in 2000 to strengthen their offering. This helped NVIDIA dominate competitors like ATI. In February, they purchased Ageia Technologies for an undisclosed sum. This acquisition continues to position NVIDIA as the leader in the gaming graphics market. As an aside, the video gaming industry is nearly $30 billion strong, and NVIDIA is a key participant in this industry’s success.

Yesterday, NVDA released 2nd quarter earnings . The numbers were less than stellar as they lost $120.9 million or $0.22 per share after some charges. CEO Jen-Hsun Huang blamed a weak PC market and pricing problems. But one quarter does not make a company. The market was pleased with the guidance as investors awarded NVDA with a gain of +10.9%. There’s good reason why.

NVIDIA is sitting on $1.62 billion in cash. That gives them almost $3 per share, with no debt. Moreover, the charges from last quarter are behind them. Instead of picking up another company to strengthen their position, they’ve decided to buy back $1 billion more shares of their own company – a sign they sense their own value. If you notice our sector rankings above, Technology just turned green and may be heading to the top. NVIDIA should play a part in Tech’s rise. To play the classic semiconductor-cycle (buying on a down-cycle and selling after an up-cycle), go with NVDA .