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Nvidia (NVDA) is a leader in the age of GPU computing; the company’s graphics processing technology is a great fit for AI, robotics, and autonomous driving applications, explains Jim Kelleher, analyst with Argus Research, a leading independent Wall Street research firm.

There are multiple paths to growth. Gaming (53% revenue); Turing GeForce cards have introduced RTX raytracing technology (lifelike light & shadow). Data center (25% of revenue, growing 60%); the Turing-based T4 Cloud GPU is experiencing the fastest adoption of any server GPU.

The company’s data center business is supplying all “Super Seven” cloud titans. Auto is showing mid-teens growth, and about to explode with Pascal DRIVE Level 5. NVidia’s lean infrastructure and fast growth equate to explosive growth in cash flow.

After the “FANG 10” selloff, NVDA shares have become much more attractive. The stock is trading at 21-times two-year forward EPS, below the historical average multiple of 24.

The two-year forward relative P/E of 1.45 is close to the five-year average of 1.47; the PEG ratio of 1.0 is below the peer average of 2.0.

Our discounted free cash flow model (DFCF) points to a value in the low $300s, in a rising trend. Our blended valuation analysis — historical comparables, peer group, DFCF — supports values well above current levels. Our 12-month target price is $250.

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