Are NVIDIA earnings about to increase 67%?

NVIDIA‘s (NASDAQ: NVDA) The recent deal with Daimler’s unit Mercedes-Benz could provide real acceleration for the IT company, particularly on its bottom line.

That is the opinion of analyst Stacy Rasgon in Bernstein Alliance‘s (NYSE: AB) Bernstein Research. He estimates that the deal could generate between $ 2.0 billion and $ 2.5 billion in revenue, and $ 2.50 to $ 3.00 in earnings per share on NVIDIA’s results. By comparison, in fiscal year 2020 the company set aside just over $ 10.9 billion in revenue, while its GAAP earnings were $ 4.52 per share.

Current and classic Mercedes-Benz cars.

Image source: Mercedes-Benz (Daimler).

Mercedes-Benz is the world’s largest luxury car maker, so NVIDIA is partnering with a company that not only has strong sales for the segment (nearly 2.4 million vehicles sold in 2019), but also serves to a relatively wealthy customer base. Such customers are likely to be more willing to purchase premium software offerings to make their units more comfortable and / or entertaining.

The new agreement between the two companies was announced last week. They will collaborate in the development of a state-of-the-art computing platform based on NVIDIA’s DRIVE technology.

NVIDIA wrote in its press release on the agreement that the platform will be “the first software-defined computing architecture that includes the most powerful computer, system software and consumer applications, marking the turning point of traditional vehicles every higher and higher – performance, upgradeable computing devices. “

Interestingly, the Bernstein analyst did not change either its target price or its recommendation on NVIDIA shares. Rasgon still believes it is worth $ 415 a share, 13% higher than its most recent closing price, and is worthy of a top performance rating.

On Friday, NVIDIA stocks ended the day 3.5% lower, a steeper drop than that experienced by the broader stock market and many peer tech stocks.