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6 Reasons NVIDIA is a Buy

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Despite a weak PC market, there are still plenty of reasons for investors

to consider NVIDIA

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• Despite the PC market slump, sales of NVIDIA’s gaming graphics cards are soaring

• In the latest quarter, NVIDIA’s gaming revenue jumped 59% year-over-year

• Sales of PC games are expected to surpass sales of console games by 2016, according to research firm PwC

• NVIDIA is in position to benefit from the continued growth of PC gaming

1) A booming gaming business

Image source: NVIDIA

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• At the end of the most recent quarter, NVIDIA had:– $4.5 billion of cash– $1.4 billion of debt– $3.1 billion of net cash

• This large cash balance allows NVIDIA to fund substantial share buybacks, totaling $766 million over the past twelve months

• Cash also gives NVIDIA room to invest in new initiatives, or make acquisitions

2) An extremely strong balance sheet

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• This excessive cash makes NVIDIA stock appear more expensive than it really is

3) The stock is cheaper than it looks

Normal P/E ratio

19.0

Normal P/FCF ratio

12.7

Cash-adjusted P/E ratio

14.1

Cash-adjusted P/FCF ratio

9.4

Based on trailing-twelve-month figures, excluding a one-time charge related to the wind-down of NVIDIA’s modem business

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• NVIDIA’s Tesla GPUs dominate the high performance computing accelerator market

• NVIDIA is teaming up with IBM to build the world’s fastest supercomputer for the Department of Energy, featuring next-generation GPUs

• NVIDIA GRID, a graphics virtualization platform, is growing in popularity. GRID customers tripled year-over-year in the latest quarter, and one-quarter of Fortune 100 companies are now trialing or deploying the technology

• Despite a recent hiccup in HPC and cloud growth, NVIDIA’s enterprise business has room to grow

4) Enterprise growth potential

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• Over the past year, NVIDIA has consolidated its lead in the discrete GPU market

5) A dominant market share

Q3 201

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Q4 201

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Q1 201

1

Q2 201

1

Q3 201

1

Q4 201

1

Q1 201

2

Q2 201

2

Q3 201

2

Q4 201

2

Q1 201

3

Q2 201

3

Q3 201

3

Q4 201

3

Q1 201

4

Q2 201

4

Q3 201

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Q4 201

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Q1 201

5

Q2 201

50%

10%20%30%40%50%60%70%80%90%

100%

Add-in Board Unit Market ShareNVIDIA AMD

Data source: Jon Peddie Research and Mercury Research

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• NVIDIA’s mobile GPU business, Tegra, has shifted to mainly focus on the automobile

• NVIDIA’s automotive revenue rose 76% year-over-year during its latest quarter to $71 million

• Tegra chips can power both in-car dashboards as well as advanced driver assistance features

• NVIDIA is positioning Tegra to be the brains behind the eventual self-driving car, working with more than 50 companies interested in its Drive PX system

6) Self-driving carsNVIDIA Automotive Partners

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