Nvidia (NVDA) Stock Rising as it Races to Develop Self-Driving Car Software

NEW YORK (TheStreet) -- Shares of Nvidia (NVDA) are advancing 0.29% $20.95 in Friday's midday trading as the chipmaker enters the fast-growing market of self-driving cars.

The California-based company's executives said the self-driving car of tomorrow is probably going to look a lot more like today's models, according to The Wall Street Journal.

Nvidia, a company best known for powering video games with its graphics processors, is now competing with tech giants like Google (GOOGL) and Apple (APPL).

While Google is making plans to begin testing its self-driving cars in California this summer, Nvidia is catching up as it began shipping a development kit to customers like Tesla Motors (TSLA), Aston Martin, and Rolls Royce, The Wall Street Journal added.

The development kits are being used to help train self-driving prototypes. While this training process could take years, the kit's software will eventually teach cars how to tell the difference between a police car and other vehicles, the Journal reported.

"But it's a race against time-as well as other carmakers-to sufficiently train the cars' computers to recognize and analyze real-world information," Nvidia's senior director of automotive operations Danny Shapiro told the Journal. "You have to train the car before you ever send it out."

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 revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NVDA's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 5.94, which clearly demonstrates the ability to cover short-term cash needs.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for NVIDIA CORP is rather high; currently it is at 56.73%. Regardless of NVDA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.64% trails the industry average.

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