NVIDIA (NASDAQ: NVDA) Closes at a New All-Time High Spurred by a Historic Acquisition Spree and Bullish Endorsements From a Needham Analyst
NVIDIA (NASDAQ:NVDA) closed at a fresh all-time high on Monday following a plunge below $200 earlier in March amid a bloodbath in the broader market induced by the coronavirus (COVID-19) pandemic.
Today’s 3.32 percent rally was largely precipitated by a bullish investment note penned by Needham analyst, Rajvindra Gill. The analyst raised NVIDIA’s stock price target from $270 to $360, marking an upside potential of over 11 percent from the current levels, while reiterating a ‘Buy’ rating for the stock. According to Gill, the acquisition of Mellanox will be “highly accretive”, boosting NVIDIA’s incremental earnings per share by $0.95 in FY 2022. The analyst also raised NVIDIA’s gaming estimates on the back of higher expected Nintendo Switch sales as well as the stay-at-home economy acting as a conducive agent for the broader gaming sphere.
Rajvindra Gill observed in his investment note:
"We expect data center (31% of fiscal Q4 sales), which is Nvidia's largest growth driver, to continue benefiting from increased demand for both public and private clouds due to the ramp of data consumption in the cloud."
As a refresher, NVIDIA officially completed its acquisition of Israel’s Mellanox Technologies on the 27th of April, capping an arduous process that spanned over 13 months. As per the details of the original agreement that was announced back in March 2019, NVIDIA paid $125 for each share of Mellanox, equating to a total purchase price of $6.9 billion. The acquisition of Mellanox will allow NVIDIA to unlock significant synergies. As an illustration, Mellanox has pioneered the InfiniBand interconnect technology, which in conjunction with its high-speed Ethernet products, is employed in over half of the world’s fastest supercomputers and multiple leading hyper-scale datacenters. This deal will allow NVIDIA to optimize its data center-based computing and cloud solutions and tap the growing demand for data storage and processing that has been driven, in large part, by AI applications, cloud services, smartphones, IoT devices, and autonomous vehicles.
Moreover, on the 4th of May, NVIDIA declared that it was buying the open networking software company, Cumulus Networks, for an undisclosed amount. The California-based software company supports upwards of 100 hardware platforms through the Cumulus Linux – its scalable OS for network switches that is ideal for cloud computing applications. Through this step, NVIDIA will be able to leverage the compatibility that Cumulus and Mellanox currently maintain. As an illustration, both companies worked in tandem to build DENT – a project to enable the creation of Network OS for Disaggregated Network Switches in campus and remote enterprise locations. They also worked together on the Onyx OS. Moreover, Cumulus pioneered ONIE – an open-source initiative that enables a bare metal network switch ecosystem where end users finally have the opportunity to choose among different network operating systems. Mellanox employs ONIE as a foundation for its switches.
NVIDIA has generated year to date gains of 34.50 percent, corresponding to a market capitalization of $198.49 billion. Today’s closing price of $322.67 marks a new all-time high. As a refresher, NVIDIA’s previous record closing price was $314.70, which was registered on the 19th of February just before the coronavirus-induced market bloodbath. Year to date, the broader S&P 500 index has registered a loss of 9.21 percent.
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