Credit: Image source: NVIDIA.NVIDIA (NASDAQ: NVDA) has made some impressive moves in 2016 that have won the company a lot of analyst attention and upgrades -- and rightfully so. The company's ability to challenge industry giants to grow in many of the most exciting and potentially high-growth sectors in the tech market could lead to much more growth in the future. Here are three ways NVIDIA stock could continue rising.
1. More big partnership announcements
NVIDIA has its hands in a lot of segments, but it still gets most of its revenue from GPUs (graphic processing units). NVIDIA announced this year that it will be the chip provider for Microsoft 's(NASDAQ: MSFT) new Surface Studio. This high-end and high-power computer is undoubtedly going to be one of the industry news-makers when it's available broadly starting in early 2017.
Another exciting partnership announcement this year for NVIDIA was that Tesla (NASDAQ: TSLA) said in late October that it had ended its relationship with Mobileye , and would be switching to NVIDIA's technology instead. NVIDIA's automated driving technology is quickly becoming one of the industry standards, and NVIDIA has now signed deals with various car companies to get its infotainment and driverless technology in new generations of connected cars. More big partnerships like these in 2017 are likely to also send the stock higher.
It will get harder and harder for the company to keep making these kinds of earnings beats since analysts will start to consider so much growth the norm for NVIDIA and begin increasing their forecasts for the next quarter. Already, Q4 estimates are high, but if history is any indication, NVIDIA could very well beat those again, which would likely send the stock higher.
Should you wait for a pullback in 2017?
NVIDIA has had an incredible 2016, both in terms of smart moves made by the company, and also by share price growth, which is up 220% so far in 2016. NVIDIA stock now trades at 67 times earnings, and it has quickly become one of the most expensive companies in its sector. As we've seen time and time again, that could mean a slight pullback in the year ahead at the first sign of growth slowing as the company matures.
Still, if you want to buy in but are waiting for a pullback, consider that shares are trading at just 39 times next year's earnings estimates because of how quickly earnings are expected to keep growing, meaning if the company performs on the bottom line throughout 2017, it could gain substantially before any pullback. Therefore, it's probably better to take the long approach with this company and invest for where it might grow to in the next five or 10 years.
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Seth McNew has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia and Tesla Motors. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
