The decision by Toyota Motor Corp to use NVIDIA Corporation to power the automaker’s autonomous driving systems could generate $1 billion to $1.7 billion in incremental sales during the next two decades and explode NVDA stock higher.
Nvidia could be making some significant earnings from Toyota, as much as $1.7 billion, by 2019, based on how much of the vehicle manufacturer’s unit shipments contain Nvidia’s “Drive PX” chips for driver assistance, says Needham & Co.’s Rajvindra Gill, as he increases his price target on NVDA stock to $200 or about 40% from its current price.
Toyota announced back in May 2017 that it plans on using the Drive PX chips from Nvidia.
There was a positive mention by Jefferies & Co.’s Mark Lipacis, who cut his rating on shares of Intel stating Nvidia is leading a “fourth wave” of computing which may erode Intel’s server-chip market-share.
The analysts said Toyota intends to deploy the level 2 chips by 2020 in everything from the Corolla to Lexus. Level 2 autonomy means systems which can control speed and steering with no driver interaction for limited intervals.
And it is not just Toyota. NVDA stock also has the catalyst of developing an ecosystem of Level 2 thru Level 4 layouts with major OEMs. Nvidia also has partnered with Volvo AB on self-driving technologies.
Nvidia is set to rake in a ton of money.
The company already has revenue growing by 14.57% on average over the past 5 years. This is quite good. Measured over the past 5 years, NVDA shows a very strong growth in EPS. The EPS has been growing by 32.45% on average per year.
NVDA has a Return On Equity of 36.40% which is among the best returns in the industry. The industry average is 12.08%. NVDA outperforms 97% of its industry peers.
The chart does not look like a decent entry opportunity at the moment. Prices have been extended to the upside lately. I would prefer to wait for a consolidation before taking a long entry.