Despite having $5 billion in Cash and FCF generation of $2 billion, Nvidia’s shelf filing has raised merger alarms
NVIDIA Corporation (NASDAQ:NVDA) is among the few stocks that have kept themselves at a quite a distance from merger and acquisitions. However, the latest analysis by Nomura Securities Analyst Romit Shah reveals a somewhat contrasting picture.
The analyst believes that Nvidia currently has a healthy level of liquidity and filings for a mixed shelf of indeterminate amount at such a time are quite interesting. There has not been any official announcement regarding strategical changes at Nvidia, but CEO Mr. JenHsun Huang has previously shown interest in transformative acquisitions.
According to Mr. Shah, most of Nvidia investors believe that it is not headed towards a merger anytime soon but the analysis of the company’s financials reveal otherwise. The growth is now slowly declining from the peak value of 29% and cash reserves of $5 billion along with recent shelf registration with SEC make merger and acquisition a very likely possibility.
Furthermore, quite a few big names this year have opted for the very same strategy as they observed declining growth numbers. The analyst suspects that Nvidia is most likely hunting for a perfect acquisition candidate, which will improve its overall presence in more diversified areas such as data center, client computing, software and other related computing disciplines.
An Artificial Intelligence and machine learning based acquisition is also within the realms of possibility, as it might boost the company’s recent advances in autonomous driving. The opportunities for Nvidia remain plentiful and given the current balance sheet and financial position, an acquisition makes a lot of sense, especially following the recent decline in growth.
The analyst reaffirmed the stock at buy with a price target of $62.50. The analyst opinion for the stock has six buy, 10 outperform, 10 hold and three underperform ratings. Nvidia currently trades at a price of $61.28 and has lost about 2.18% in the market since the opening of the session.