FBR Capital Markets Raises NVDA Target To $19 Following INTC Deal

FBR Capital Markets is raising its PT on shares of and NVIDIA Corporation (NASDAQ: NVDA) – to $19 from $16 – following its new agreement with Intel Corporation (NASDAQ: INTC).

“For NVIDIA, this agreement required some complex modeling,” FBR Capital Markets writes. “First, we added roughly $100 million in ‘other' revenue to the January quarter and assume this is the legal settlement piece of the agreement, with the other $1.4 billion in cash payments to be amortized over six years (24 quarters) as incremental gross and operating margin (roughly $58 million of margin benefit).

“Second, we added about $65 million of quarterly revenues and $7 million of quarterly cost of sales in order to drive $58 million per quarter of net gross and operating margin good news, while driving a roughly three-point gross margin benefit, per managements guidance.

“Third, we ascertained that the $0.29 EPS benefit management referenced implied a higher tax rate on the Intel settlement of roughly 27%, versus NVIDIA's previous corporate average of 17%, driving a new blended tax rate for NVIDIA of roughly 20%.”

NVIDIA Corporation currently trades at $20.15; Intel trades at $20.76.