Investing
Jefferies Adds Super-Hot Chip Stock to Franchise Stock Picks List
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With the market beginning the year with a major sell-off, everybody remains on edge. Fortunately the numbers from China were at least in line, and the oil situation may start balancing out after Wednesday’s wash-out. One thing we have noticed here at 24/7 Wall St. is that many of the firms we cover already have made some tweaks to their top stocks lists for 2016. Hardly a surprise given the historic sell-off to start the year.
In a recent research note, Jefferies adds a very hot chip stock to its prestigious Franchise Picks list. We also screened for the other newest additions for investors to consider now. All these stocks are rated Buy.
NVIDIA
This top tech company reported outstanding earnings in November, and its stock now has been added to the Franchise Picks list. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles. It is also moving into visual computing chips for cars, mobile devices and supercomputers.
NVIDIA has a technology partnership with electric car maker Tesla, and recently posted very strong earnings. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return. That is currently estimated to be $1 billion next year.
The company posted earnings that were way ahead of estimates, and the first-quarter outlook implies earnings per share 26% ahead of current consensus. With gaming revenues up 44% year over year, the analysts believe there remains high overall Wall Street skepticism around the company, as most are unaware of the positive dynamics in the PC gaming and e-sports markets.
Some Wall Street analysts feel that virtual reality could see 10 million in annual shipments in three to five years, and NVIDIA will be a huge player. In fact, it’s possible that those shipments could represent as much as $750 million per year for the company and competitor AMD. Jefferies also cites the large Technology Assessment Management Systems in gaming, autos and cloud enabled by NVIDIA’s graphics leadership.
NVIDIA investors receive a 1.7% dividend. The Jefferies price target for the stock is $38, and the Thomson/First Call consensus price target is $31.65. The stock closed Tuesday at $27.33.
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