RBC Affirms NVIDIA (NVDA) at 'Outperform' Amid Move to Raise Funds for Capital Allocation

September 13, 2016 3:41 PM EDT
Get Alerts NVDA Hot Sheet
Price: $104.01 -1.09%

Rating Summary:
    24 Buy, 17 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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RBC Capital affirms NVIDIA (Nasdaq: NVDA) with an Outperform rating and $72 price target as the company girds to raise debt.

Analyst Mitch Steves said today, Nvidia is in process of negotiating and arranging a revolving credit facility with aggregate commitment of up to $750M. The filing notes that the proceeds will be used to pay down convertible notes and general corporate purposes (we think buybacks at this time). With the majority of NVDA's cash held overseas ~75%, we think this gives the Company additional US based cash to help with capital allocation in the future. Net Net: we think the Company is looking for ways to raise US funds for capital allocation at this time given than the majority of their cash balance is held overseas.

According to the latest 10-K filing the Company has $3.7B in cash held overseas and $1.3B held in the US (or approximately 74% held abroad). As of the latest quarter the company has $4.9B in cash, and we think the ratio has remained largely unchanged suggesting that ~$3.7B is held overseas at this time (~75%).

Assuming the Company repurchased $750M in shares this would result in a share count reduction of 12.5M (assumes $60 price). If this were to occur today, it would result in ~$0.05 in EPS accretion on an annual basis or +3%.

For an analyst ratings summary and ratings history on NVIDIA click here. For more ratings news on NVIDIA click here.

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