Why Chipmaker Nvidia (NVDA) Eked Out Gains Today

NEW YORK (TheStreet) -- In-line third-quarter earnings and a generous dividend encouraged Wall Street to buy up shares of Nvidia Corporation (NVDA) during Friday trading. The chipmaker had spiked 5% to $15.27 by early afternoon.

Reporting after the bell the on Thursday, profit of 20 cents a share on revenue of $1.05 billion was in line with Wall Street's expectations.

Management also announced a 13% increase to Nvidia's quarterly dividend and their intention to return $1 billion to shareholders in fiscal year 2015 through a combination of stock repurchases and dividend payments.

Weaker-than-expected fourth-quarter guidance, however, has sparked concerns of an increasingly crowded marketplace. The Santa Clara, Calif.-based company said revenue should come in around $1.05 billion, lower than consensus of $1.08 billion.

Specializing in creating graphics chips (GPUs) for personal computers, the company has been pushed to diversify into components for tablets and smartphones. However, competition is stiff with giants Broadcom (BRCM), Qualcomm  (QCOM) and Texas Instruments (TXN) cornering the market.

GPU sales fell 2% year over year to $876.8 million, though gained 2% sequentially. The company's Tegra processor division, which manufactures chips for smartphones, saw sales drop more than half that of a year earlier, but was up 111.4% since the quarter earlier. Gross profits fell 12.5% on a year earlier.

TheStreet Ratings team rates Nvidia Corp as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Nvidia Corp(NVDA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

If you liked this article you might like

The FOMC Desperately Needs a Dose of Reality: Market Recon

Charts Signal Buying Opportunity for NVIDIA: Cramer's 'Off the Charts'

Watch Out For the Dominoes That Fall: Cramer's 'Mad Money' Recap (Wed 9/20/17)

These Are the Top 50 Jobs in the U.S. Right Now

Buying Nvidia Now Is Like Getting Intel Way Back in 1993, Jim Cramer Says