Source: JHVEPhoto / Shutterstock.com Advanced Micro Devices (NASDAQ: AMD) stock fell 6% yesterday.
But I’ll argue today that it’s not through any specific fault of its own. My long-term prognosis for AMD stock is still optimal.
Short term, we can remain on guard, but there aren’t any internal issues that need fixing. Firs, Thursday was a painful day for all of Wall Street not just AMD. Wednesday’s jubilation after the FOMC meeting, turned into a bull funeral. The bears came back with a vengeance and completely demolished investors the next day.
Secondly, the chip sector is already reeling from shortages and backlogs. The effects of locking down the world for Covid-19 still linger. The 2020 disruption has caught up with the manufacturers and is creating serious bottlenecks. The tech sector is feeling this more than most other industries. Regardless, AMD has managed to compensate and adapt judging by the reports so far. Ticker Company Current Price AMD Advanced Micro Devices $93.87 Supply Chain Issues Are Partly to Blame Despite the abysmal sourcing conditions, AMD has continued to deliver strong results.
Management reported earnings this week and the stock rallied for good reason. AMD grew sales 71% and earnings 117%, leaving no doubt over the quality of the team. The drop yesterday merely brings AMD back to its pre-earnings base. With such blowout numbers, the opinions are almost unanimously positive. I found one price target downgrade, but amd stock was from $165 to $150, so it’s not an issue. According to Yahoo Finance, AMD needs to rally amd stock than 40% before it reaches its average price target.
This month there are challenges from the Federal Reserve fears. There is also the matter of the old Wall Street adage of sell in May and go away. But, in the long term, these are mere temporary hiccups. There are technical challenges as long as it’s under $102 per share. But there are support zones below and would find footing with the markets.
Meanwhile, the downside now creates opportunities for new investors. Under the leadership of Lisa Su AMD stock continues to shine. The financial metrics are beyond reproach from all aspects. Although Intel (NASDAQ: INTC) is still larger and Nvidia (NASDAQ: NVDA) much flashier, AMD is a star. Management more than tripled revenues and net income in just five years.
Regardless, AMD managed to hold its valuation at a reasonable level. In amd stock, it is 30% cheaper than its rival NVDA. Even from an absolute basis it’s on par with similar fast growing companies. Source: Charts by TradingView The company’s earnings report should give investors confidence in AMD. The company beat expectations and amd stock a strong outlook despite the current challenges amd stock faces.
The team is executing well on plans and not hiding behind excuses. The field is competitive, but they are a top contender with plenty of room to prosper. All aspects of their businesses are growing, and the trend is not about to fade.
Demand will remain strong for a decade as we digitize the world. There are new applications coming up constantly, so AMD will be busy. The move to the metaverse alone could fuel a new kind of tech application. It doesn’t take a wild imagination to see AMD prosper under such scenarios.
Retail investors would do well to amd stock their own opinions of AMD stock. When the bullish thesis is this obvious we don’t need the experts. Wall Street tends to complicate things with cryptic ratings.
Here is a clear main street statement: If the markets are higher in the future, then so is AMD! On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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per Employee $1.218M • P/E Ratio 35.56 • EPS $2.68 • Yield N/A • Dividend N/A • Ex-Dividend Date N/A • Short Interest 27.42M 04/14/22 • % of Float Shorted 1.70% • Average Volume 106.43M Advanced Micro Devices Inc. Advanced Micro Devices, Inc.
engages in the provision of semiconductor businesses. It operates through the following segments: Computing & Graphics, and Enterprise, Embedded and Semi-Custom. The Computing and Graphics segment includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units, data center and professional GPUs and development services.
The Enterprise, Embedded and Semi-Custom segment includes server and embedded processors, semi-custom System-on-Chip products, development services and technology for game consoles. The company was founded by W. J. Sanders III on May 1, 1969 and is headquartered in Santa Clara, CA. Competitors Name Chg % Market Cap NVIDIA Corp.
-0.90% $467.62B Intel Corp. -0.67% $181.14B Applied Materials Inc. -0.85% $99.38B Analog Devices Inc. -1.33% $81.71B Micron Technology Inc. -1.32% $78.56B Lam Research Corp. -0.64% $66.34B Tokyo Electron Ltd. -1.08% ¥8.53T LONGi Green Energy Technology Co.
Ltd. A -2.97% ¥362.84B SK Hynix Inc. 0.93% ₩73.92T MediaTek Inc. -0.83% Amd stock Copyright © 2022 MarketWatch, Inc. All rights reserved.
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NASDAQ does not use this value to determine compliance with the listing requirements. Advanced Micro Devices, Inc. is an American multinational semiconductor company based in Santa Clara, California, that develops computer processors and related technologies for business and consumer markets.
While it initially manufactured its own processors, the company later outsourced its manufacturing, a practice known as going fabless, after GlobalFoundries was spun off in 2009. AMD's main products include microprocessors, motherboard chipsets, embedded amd stock, graphics processors, and FPGAs for servers, workstations, personal computers, and embedded system applications. Wikipedia This list is generated from recent searches, followed securities, and other activity.
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• Log In • Help • Join The Motley Fool Advanced Micro Devices ( AMD 1.57%) reported strong quarterly results on Tuesday, May 3, which sent the stock rocketing after hours. This quarter was also the first to include results from AMD's acquisition of Xilinx, which closed on Feb. 14. With the price spike, investors might be wondering if purchasing the stock now is a prudent investment decision. The earnings report revealed several vital items investors must understand before taking a position in this chipmaker.
Image source: Getty Images. An impressive quarter amid a challenging environment AMD makes several computer components, including processors, graphics processing units (GPUs), and accelerators for data centers. With a slowdown in PC component sales expected during the quarter, the primary business had to navigate demanding expectations.
It also completed the Xilinx acquisition during the quarter, further adding to the workload the company had to accomplish during the first quarter. Its acquisition of Xilinx allowed AMD to expand further into the semiconductor space with field-programmable gate arrays (FPGAs). Despite the challenging backdrop and time consumption of the acquisition, AMD still managed to post a strong quarter. AMD's quarterly results should be assessed from amd stock perspectives: with and without the addition of Xilinx.
Any time a company makes an acquisition, it instantly recognizes a vast revenue boost as the acquired company's sales are lumped into amd stock quarterly results. This accounting skews results as AMD grew its overall quarterly revenue 71% year over year to $5.9 billion. However, when Xilinx's contribution is subtracted, AMD's sales growth was still an impressive 55%. AMD exceeded its revenue guidance by $228 million (a 4.5% beat) amd stock raised its full-year sales outlook to $26.3 billion, up from the $21.5 billion it established at the beginning of the year.
The Xilinx acquisition is the primary driver of this increased guidance, but management didn't break out how much it would contribute. Using Xilinx's last three publicly available quarters (as Xilinx was partially included in this quarter), it had about $2.8 billion in sales.
If it continues growing at its last reported year-over-year pace of 26%, Xilinx will contribute around $4.1 billion this year.
Subtracting this value from AMD's revenue guidance gives the original AMD business a full-year outlook of amd stock billion. This extra $700 million is a sizable raise from the previously guided value.
AMD also raised its gross margin outlook from 51% to 54%, showing its pricing power. AMD is navigating an inflationary environment well, whether it is resisting price increases from suppliers or passing hikes onto the consumer. Image source: AMD. Amd stock to the bottom line, its non-GAAP (adjusted) net income rose 110%, excluding the Xilinx addition. Non-GAAP metrics are also essential to use, as acquisition costs can skew metrics using generally accepted accounting principles (GAAP) in quarters when acquisitions close.
This rise was driven amd stock a substantially higher operating margin, which means AMD is becoming a more efficient business. Investors should be thrilled when a business can improve its operating margin from 22% to 30% (excluding the Xilinx addition).
Overall, AMD blew away internal expectations and raised full-year guidance. Investors couldn't ask for much better from management. Is the stock a buy? From a valuation standpoint, AMD has returned to a typical price-to-earnings (P/E) ratio for the company. AMD PE Ratio data by YCharts However, it trades far below the valuation of one of its competitors, Nvidia (with a P/E of 51), and above another, Intel (7.5). Nevertheless, this valuation is probably a fair price for AMD with a strong outlook.
AMD's server demand isn't slowing down and Xilinx will continue to provide the company with a solid sales boost. AMD is a reliable company that just reported great earnings. Investors should have no problem purchasing the stock, regardless of its recent spike.AMD reported first-quarter earnings after the bell on Tuesday, beating analyst estimates for earnings and revenue, sending the stock up as much as 8% in extended trading.
Here's how the chipmaker did versus Refinitiv consensus estimates in the quarter ending March: • EPS: $1.13, adjusted, versus $0.91 expected, up 117% year-over-year • Revenue: $5.89 billion, versus $5.52 billion expected, up 71% year-over-year AMD said it expected $6.5 billion in amd stock in the current quarter, ahead of analyst expectations of $6.38 billion. AMD's results on Tuesday suggest that the chipmaker is still growing fiercely, with 71% sales growth in the first quarter, and every one of its individual lines of business growing by double digits during the quarter.
One highlight amd stock AMD is its high-end server chip business, which primarily competes with Intel. Some data points show that AMD has taken market share from its rival while it tries to amd stock its manufacturing prowess back. Some analysts suggest that PC sales could shrink this year after two years where shipments exploded as people needed laptops to work from home or go to school remotely.
Some investors believe that the pandemic PC boom is over, but AMD, which supplies the processor at the heart of many laptops and desktops, isn't feeling the decline. "Although the PC market is experiencing some softness coming off multiple quarters of near-record unit shipments, our focus remains on the premium, gaming and commercial portions of the market where we see strong growth opportunities and expect amd stock continue gaining overall client revenue share," AMD CEO Lisa Su said, adding that AMD believes that it has gained market share in PC chips for eight straight quarters.
PC sales are reported in AMD's computing and graphics segment, which rose 33% on an annual basis and was 8% higher than the December quarter. AMD said that the increase was amd stock both by central processors and graphic processor sales, and that the average sales price for Ryzen processors rose during the quarter. Cloud server sales are reported in AMD's Embedded, Enterprise, and Semi-custom segment, which increased 88% to $2.5 billion.
AMD said the rise was driven by higher server processor sales as well as semi-custom sales, which are the chips that go into the heart of game consoles like the PlayStation 5. Su said that AMD's semi-custom business grew by "double-digits" on a year-over-year basis due to consumer demand for the Playstation 5, Xbox One, and Valve's Steam Deck.
"Sales for this game console generation continue to outpace all prior generations, and we expect 2022 to be a record year for our semi-custom business," Su said.
AMD stock has had a rough 2022, dropping over 39% so far, after a blowout 2021 when its sales increased 68% and gross margin grew to 48%. Investors are shying away from semiconductor stocks in the face of increased inflation risk. Last week, Intel gave a disappointing forecast for the June quarter, citing weak PC demand and macroeconomic challenges. AMD said it completed the acquisition of Xilinx in February. The deal was originally announced in 2020 with a $35 billion price tag.
AMD said that its results included six weeks of revenue from the deal, and that without Xilinx sales, revenue would have only increased 55% year-over-year to $5.3 billion. AMD said it repurchased $1.9 billion of its stock during the quarter.
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13.62K Followers Follow Summary • AMD’s Data Center business is booming. • Revenues and gross margins continued to soar in the last quarter.
• AMD just added $4.8B to its guidance for FY 2022. • The Xilinx acquisition, new processor launches and server market share gains could result in another year of revenue acceleration for AMD.
gonin/iStock via Getty Images Shares of Advanced Micro Devices, Inc. ( NASDAQ: AMD) soared 8% in extended trading yesterday after the company submitted its earnings card for the first-quarter. The earnings sheet strongly suggests that AMD’s growth is not only not slowing but that AMD is potentially looking at another year of revenue acceleration in FY 2022. Specifically, I expect AMD’s Data Center business to overtake Computing & Graphics regarding revenue contribution in the second half of 2022.
Shares of AMD, given the firm’s potential in consumer and commercial markets, are undervalued! AMD’s data center business is booming I am going to make a strong assertion right here: I believe that AMD’s revenue growth and gross margins have not peaked yet, which suggests that the stock retains potential to revalue higher in 2022.
But before I explain why, let’s take a quick look at AMD’s Q1’22, which was just incredible. AMD’s total revenues in Q1’22 were $5.9B, showing 71% year-over-year and 22% quarter over quarter growth. Xilinx, whose acquisition AMD completed in February, contributed $559M in quarterly revenues to AMD’s top line. AMD guided for $5.0B +/- $100M in revenues for the first-quarter, so actual results were $200M better on an acquisition-adjusted level and $800M better when considering the Xilinx revenue contribution.
AMD’s Computing & Graphics revenues surged 33% year over year to $2.8B due to strong Ryzen (desktop and mobile) and Radeon processor sales as well as higher average GPU selling prices, especially for high-end Radeon graphics cards. AMD’s Enterprise revenues gained 88% YOY to a record $2.5B due chiefly to higher EPYC and semi-custom processor sales. EPYC processors are AMD’s flagship server CPUs that are largely responsible for AMD’s server market amd stock gains in recent years.
In AMD’s first-quarter we can see the continuation of a trend that accelerated in FY 2021: Amd stock Data Center business is growing much faster than AMD's Computing & Graphics business and it doesn’t show any signs of slowing down.
For that reason, and because of the Xilinx acquisition, I expect AMD’s Data Center business to overtake Computing & Graphics regarding total revenue contribution in the second half of the year. AMD AMD was also able to expand gross margins due to pricing strength in consumer and enterprise markets. AMD’s gross margin in the first-quarter gained 660 basis points year over year to 53%.
Given the strength of AMD’s product line-up in consumer and commercial markets right now, I believe AMD could grow its gross margin further in FY 2022. AMD Xilinx acquisition: Amd stock of more buybacks Acquiring Xilinx is like throwing an accelerant on AMD’s already booming Data Center business.
Not only does the acquisition expand AMD’s addressable amd stock, but it allows AMD to leverage Xilinx’s chip architecture to broaden its customer base and make inroads into new markets. While the Data Center business is the obvious business segment that will benefit from complimentary product portfolios, the acquisition opens up new opportunities for AMD in 5G, wired communications, artificial intelligence and embedded technologies.
I expect AMD (+Xilinx) to spend about $4.0B annually on research and development, which could create result in amd stock revenue potential that the market may not even consider currently. AMD Because Xilinx has higher free cash flow margins than AMD, the acquisition is expected to be FCF accretive to AMD in the first year, meaning consolidated FCF margins are set to increase going forward….
even without considering the impact the launch of new high-margin products is going to have on AMD’s free cash flow. AMD achieved record free cash flow of $924M in Q1’22 and a FCF margin of 16%. Xilinx could add $1.0B in annual free cash flow to AMD by FY 2023 (potentially more) which could boost AMD’s FCF margins to the 20-25% range.
The expected boost to free cash flow could also result in AMD seriously stepping up its share buybacks in FY 2023. AMD repurchased $1.9B of its shares in Q1’22 and has $8.3B in remaining authorization left. I expect AMD to exhaust its authorization completely in FY 2022 and predict that the company will announce another $10B buyback before the end of the year.
Why FY 2022 could be a year of revenue acceleration The first reason why revenue growth could accelerate is because AMD is consolidating Xilinx in its financials. Xilinx added $559M in revenues from mid-February until the end of the quarter and I estimate that Xilinx could make a $4.5-$5.0B top line contribution resulting from the firm’s various businesses in FY 2022. The top line contribution could be even higher than that since Xilinx also experiences broad-based demand strength for FGPA and adaptive SoC products.
The acquisition of Xilinx’s Data Center capabilities will also allow AMD to expand on recent market share gains in the server market, where the company is putting heat on Intel ( INTC). AMD has made steady server market share gains in the last few years, and the Xilinx acquisition as well as new server processor launches could accelerate AMD’s momentum in this vitally important market. Tom's Hardware AMD just launched its 3rd Gen AMD EPYC processor with AMD 3D V-Cache Technology, dubbed Milan-X, in March.
This promises up to 66% better performance (based on AMD’s internal testing). These new processors are built on AMD’s Zen 3 core architecture and expand AMD’s product offering in the server CPU market.
Since EPYC processors have been a hit with customers in recent years, the new server CPU has the potential to see strong customer uptake in 2022. New product launches are also expected in other segments, where AMD continues to make a splash with its Ryzen processors.
Ryzen processors are not only used by gamers, but also by designers and content creators that require high performance amd stock solutions.
To tap into this rapidly growing market, AMD recently launched Ryzen 6000 mobile processors and Ryzen 6000 PRO processors, which are set to make a revenue impact in the coming quarters. Later this year, AMD will release the Ryzen 7000 Series desktop processors, which are based on 5nm “Zen 4” architecture.
The Ryzen 7000 Series could benefit from amd stock equipment upgrades from gamers that remain the core target group for Amd stock gaming chips. For those two reasons -- Xilinx integration and new CPU product launches - I believe that AMD will see another year of revenue acceleration in 2022.
After AMD added a material amount of dollars to its top line guidance for FY 2022, I also expect revenue estimates to rise even more strongly going forward as analysts refresh their updates. Data by YCharts AMD Outlook FY 2022 AMD’s outlook for Q2’22 calls for $6.5B in revenues +/- $200M and gross margins of 54%. For FY 2022, AMD expects $26.3B in revenues, indicating 60% year over year growth.
The initial outlook for FY 2022 called for revenues of $21.5B, meaning AMD added $4.8B to its revenue guidance compared to the firm’s initial guidance.
To a large extent, this upgrade in guidance reflects the revenue impact Xilinx is expected to make. However, AMD’s strength in the server market and new product releases also likely contributed to the bullish outlook.
What investors may want to keep in mind is that AMD always guides conservatively and routinely exceeded its quarterly revenue guidance in FY 2021, so the guidance for FY 2022 could even be further improved in later quarters.
AMD Cheap valuation AMD, despite a raised guidance for FY 2022 and record gross margins, only sells for 18.8 X (FY 2023) earnings and 5.1 X (FY 2023) revenues. Nvidia ( NVDA), AMD's largest rival outside the server market, is trading at much higher earnings and sales valuation factors. Data by YCharts Risks with AMD The market expected in FY 2021 that semiconductor demand would slow and that AMD’s commercial growth would decelerate.
This did not happen, and, given the refreshed guidance for FY 2022, I don’t believe a revenue deceleration will happen this year either. However, I could be wrong about that. Slowing top line growth (especially amd stock the Data Center business), weaker gross margins and declining pricing strength for processors/graphics cards amd stock indicate growing pressure on AMD’s valuation and growing risks for the stock.
My Conclusion My key assertion is that AMD’s amd stock growth is currently unstoppable and will continue to accelerate in FY 2022 due to the Xilinx acquisition, momentum in Data Centers and new processor releases, especially in the server business.
New EPYC and Ryzen product launches this year could lead to AMD raising its annual revenue guidance later this year as well. AMD just raised its revenue guidance by 22% or $4.8B relative to the guidance submitted just 3 months ago.
Given its potential for growth in consumer and commercial markets, AMD’s potential remains undervalued at a P-E ratio of 18.8x! Disclosure: I/we have a beneficial long position in the shares of AMD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha).
I have no business relationship with any company whose stock is mentioned in this article.