“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, April 27, 2020

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy

ALSO

"Trading Capital Management"



Option Trade – NVIDIA Corporation (NASDAQ:NVDA) Calls

Monday, April 27, 2020

** OPTION TRADE: Buy NVDA MAY 15 2020 310.000 CALLS at approximately $5.80.

Place a pre-determined sell at $11.60.

Also include a protective stop loss of $2.35.

Preamble.....

The maker of graphics and high-performance computing chips NVIDIA Corporation (NASDAQ:NVDA) has so far weathered the COVID-19 storm quite well. Although its share price dropped along with the majority of the market in March, it has already clawed back most of the coronavirus driven losses. Year-to-date its share price is up by 23%.

And, Tigress Financial’s Ivan Feinseth says that “Nvidia is a great play.”

Nvidia’s opportunities in “all key secular leading-edge technology demands,” should continue “to drive higher returns on capital, increasing economic profit, and greater shareholder value creation.”

Analysts see Nvidia enduring or thriving in the coronavirus crisis, as people reluctant to go outside eat up more food delivery and digital bandwidth. 

About NVIDIA.....

NVIDIA‘s invention of the GPU in 1999 sparked the growth of the PC gaming market, redefined modern computer graphics and revolutionized parallel computing. More recently, GPU deep learning ignited modern AI — the next era of computing — with the GPU acting as the brain of computers, robots and self-driving cars that can perceive and understand the world.

Influencing Factors.....

Nvidia dominates the gaming world, where its high-speed processors are ideally suited to power hungry gaming needs. Along with recently launching its GeForce Now cloud gaming service, the company has formed an alliance with Tencent in China to launch START, a cloud-based gaming service.

Nvidia outbid Intel and paid $6.9 billion for the purchase of Israeli data center company Mellanox. The deal finally got the green light from the Chinese authorities this week and should further enhance its Data Center capabilities.  

The acquisition, initially announced on March 11, 2019, unites two of the world’s leading companies in high performance and data center computing. Combining NVIDIA’s leading computing expertise with Mellanox’s high-performance networking technology, the move will enable customers to achieve higher performance, greater utilization of computing resources and lower operating costs.

“The expanding use of AI and data science is reshaping computing and data center architectures,” said Jensen Huang, founder and CEO of NVIDIA. “With Mellanox, the new NVIDIA has end-to-end technologies from AI computing to networking, full-stack offerings from processors to software, and significant scale to advance next-generation data centers. Our combined expertise, supported by a rich ecosystem of partners, will meet the challenge of surging global demand for consumer internet services, and the application of AI and accelerated data science from cloud to edge to robotics.”

Nvidia’s technology has positioned the company at the center of industries increasingly reliant on AI and deep learning, such as the automotive sector and healthcare; Nvidia’s high-speed GPU capabilities are contributing in the fight against COVID-19 and it has made its Parabricks genome-sequencing software available (which makes use of Nvidia’s GPUs) for researchers trying to sequence the COVID-19 genomes.

Analysts.....

Tigress Financial’s Ivan Feinseth says “The integration of the two companies enhances NVDA’s ability to combine compute offload/acceleration, which is NVDA’s core expertise, with high-speed interconnectivity, which is Mellanox’s expertise, to meet the needs of high-performance applications used in AI, machine learning, and data analytics.”

Sealing the deal for Feinseth, is Nvidia’s exemplary balance sheet. “As of January 2020, NVDA had $10.35 billion, $16.91 per share, in excess cash, which along with our expected Economic Operating Cash Flow (EBITDAR) generation of $7.74 billion over the NTM, will enable it to continue to fund R&D and strategic acquisitions,” Feinseth concluded.

Accordingly, Feinseth reiterated a Buy on Nvidia, without suggesting a price target.

Nvidia stock jumped after a analyst said the company's AI technology and graphics-processing capability could play a bigger role for people researching the coronavirus.

Nvidia stock jumped after Needham analyst, Rajvindra Gill, predicted, in March, a "surge in demand for Nvidia's GPUs in the medical field, particularly in DNA sequencing and drug development." Gill also said Nvidia's strong balance sheet and cash flow would make it more popular with investors seeking companies able to weather the pandemic's impact on the economy.

Nvidia's graphics processors are also used for PC gaming. Bank of America analysts said this month that consumers were likely "upgrading to gaming PCs to keep themselves entertained while stuck at home," with Nvidia stock potentially benefiting. BofA has said demand for PC games "could fare better in an economic downturn" caused by the coronavirus shutdown.

Feinseth’s endorsement gets the Street’s backing. Nvidia’s Strong Buy consensus rating is based on 26 Buys, 4 Holds and 1 Sell. The average price target comes in at $306.14 and implies a modest upside of 6%.

So…..

Nvidia’s fifty day simple moving average is $254.07 and its 200-day simple moving average is $236.23. The company has a market cap of $173.96 billion, a PE ratio of 64.07, and a P/E/G ratio of 3.03 and a beta of 1.47. NVIDIA Co. has a twelve month low of $132.60 and a twelve month high of $316.32. The company has a debt-to-equity ratio of 0.21, a current ratio of 7.67 and a quick ratio of 7.13.