Nvidia’s (NVDA, $163.31) surprising acquisition of Mellanox (MLNX, $118.07)
Analysts are still trying to figure out what Nvidia Corporation’s $6.9 billion acquisition of Mellanox Technologies Ltd. could mean for the long term, as the two companies’ businesses overlap very little.
Nvidia is famous for its state-of-the-art graphics oriented chips. Over the years, it has seen an upsurge of its usage and relevance across new workloads, especially in data center markets including applications in high-performance computing and artificial intelligence.
Mellanox, on the other hand, specializes in networking chip and card making and has very little to do with actual computing. It is unclear what the combination of the two could mean in terms of revenue as both technologies already work side by side on the same servers used in high workloads.
Analysts argue that Mellanox’s $1.1 billion revenue will not be transformational for Nvidia. But Mellanox's 24.8% operating margin under Nvidia’s control might help improve the operating margins to more than 30%. Nvidia’s gross margins in 2018 came in at 69.2%. As such, the deal should be accretive to Nvidia within the first year given the attractive metrics.
Even though there is no product overlap between the two companies, the acquisition could be seen as Nvidia’s attempt to diversify its offerings and improve its competitive standing against other large data centers and networking rivals. Nvidia’s focus on AI could be a potential competition to China’s growing interest in the field.
Overall, Nvidia’s acquisition of Mellanox seems like a long-term bet that computing and networking will one day come together.
NVDA's MACD Histogram just turned positive
The Moving Average Convergence Divergence (MACD) for NVDA turned positive on December 24, 2024. Looking at past instances where NVDA's MACD turned positive, the stock continued to rise in of 47 cases over the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on December 30, 2024. You may want to consider a long position or call options on NVDA as a result. In of 79 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where NVDA advanced for three days, in of 373 cases, the price rose further within the following month. The odds of a continued upward trend are .
NVDA may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 64 cases where NVDA's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
NVDA moved below its 50-day moving average on December 27, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for NVDA crossed bearishly below the 50-day moving average on December 16, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 17 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where NVDA declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for NVDA entered a downward trend on December 27, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 68, placing this stock better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. NVDA’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (50.000) is normal, around the industry mean (14.265). P/E Ratio (53.016) is within average values for comparable stocks, (57.075). Projected Growth (PEG Ratio) (0.962) is also within normal values, averaging (3.158). NVDA has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.021). P/S Ratio (29.499) is also within normal values, averaging (58.621).
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a manufacturer of computer graphics processors, chipsets, and related multimedia software
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