"Nvidia Drops 4% Even as Needham Ups to Buy" (NVDA)

The stock closed down almost 5% at $83.64 -4.33 (-4.92%). After Friday's 30% upmove we were bracing for as much as a 10% drop out of the chute. For folks new to this type of investing, high-tech at high multiples, the swings can be almost terrifying, especially now that it is not 'undiscovered'.
C'est la vie, c'est la guerre, c'est la pomme de terre.

From Barron's Tech Trader Daily:

Shares of Nvidia (NVDA) today are down $3.78, or 4%, at $84.20, despite the stock getting an upgrade from Needham & Co. to Buy, following a round of price target increases on Friday after its blowout fiscal Q3 report and outlook on Thursday evening, which drove the stock up 30% Friday.

Needham & Co.’s Rajvindra Gill raises his rating on the shares to Buy from Hold, with a $100 price target, writing that despite the 30% jump, “we still see considerable upside as NVDA targets expanding markets.”

Gill is modeling $6.837 billion in revenue and $2.93 per share in EPS this year, up from $6.04 billion and $2.27 per share. For 2017, he sees $7.834 billion and $3.10, up from $6.34 billion and $2.20 per share.

Gill likes the multiple “long-term secular trends,” which include making “ADAS” autonomous driving for the likes of Tesla (TSLA); enabling “proliferation of machine learning, AI and graphics virtualization in the data center,” and the rise of “virtual reality devices in PC and gaming mkts driving higher graphics content.”

Here’s how he scopes out the automotive opportunity:

We have developed a proprietary bottom-up view of the total ADAS semiconductor market, which we estimate will grow conservatively from $2 billion to over $8 billion in five short years. We estimate that Level 3-4 attach rates for ADAS applications grow from essentially zero to over 41% of all global automotive vehicle production by 2021. Assuming ASP content for Level 3-4 at $476-694 per vehicle, we estimate NVDA has a revenue TAM opportunity of nearly $6 billion. Given NVDA’s product positioning vis-a-vis the competition, we believe NVDA could capture 20-30% of that opportunity over the next 3-5 years, or $1.2-1.8 billion. Currently, NVDA is generating $502MM of sales in FY17 and growing to $510 MM in FY18, almost exclusively infotainment clusters. We believe the partnership could add additional $17-20 million revenue per quarter to NVIDIA’s automotive division. However, the big prize for NVDA is capitalizing on the growing trend towards Level 3-4 adoption in FY19 and FY20.

And here’s how he assesses the $8 billion market for ADAS silicon at various “levels” of autonomy, 1 through 4, by 2021...MORE

We'll have more tomorrow.