Nvidia (NVDA): In the Chips with Tegra 2?

Posted Feb 28th 2011 10:20AM by Steven Halpern
Filed under: Newsletters, Stocks to Buy

"Chip stocks have always been tough to invest in, as the group has vicious ups and downs," observes Mike Cintolo.

Nevertheless, explains, the editor of Cabot Top Ten Weekly, "Nvidia (NVDA) is one of the hottest stocks out there because investors think it might have the next big thing in the chip world-dubbed Tegra 2.

"Despite the volatility in the chip sector, history shows that many chip firms can produce huge gains if they have a unique new product that's serving a mass market (or, sometimes, a new market ... like camera cell phones back in the early 2000s).

"Tegra 2 is a high-performance, low power consumption semiconductor that's being used in many of the next-generation smart phones and tablet computers coming out this year.

"But just as exciting, Nvidia's management has stated that the next version of the Tegra chip, which could boost performance five-fold (!), is already being tested by customers and products using it could hit the market in August or September.

"If true, that could give the company a whopping one-year lead on the competition, all while the markets for smart phones and tablets are soaring.

"Sales and earnings are nothing to write home about yet, but analysts see earnings north of $1 per share this year, and that could be very conservative. We like it.

"NVDA is not for the faint of hear. After a 14% pullback, shares again surged after management bumped up guidance for the coming quarter. And that push came on massive volume as well-more than 80 million shares, the third day this year with such huge trade.

"True, the shares were recently yanked back down by the market, but the stock remains above support in the 20.5 range, where the 50-day moving average stands.

"Clearly, big things are going on at Nvidia, and while the stock is very volatile, we think it has huge potential if management makes the right moves. "

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