Rami Matarieh Tanvi Pinnamareddy
Technology, Semiconductors 2/12/2022Micro Devices Advanced
(NYSE: AMD)
Overweight
Company Background: AMD, which stands for Advanced Micro Devices, is a semiconductor company that produces a wide variety of microchip products. They are known for their popular lines of graphics processors and system processors. AMD has staged an amazing turnaround over the past six years, fueled by new products and improved profitability, and AMD stock has climbed as a result. AMD saw its shares rise 55% over the past year. The company has also posted revenue growth of over 50% in the past five quarters.
Performance 1YR
Company Information Price: $113.18 52 wk-range: $72.50 - $164.46 YTD Return: -21.35% IPO Date: January 22, 1999 Mkt Cap: $135.747B Shrs Ostd: 1.207B $ Millions Revenue G. Profit G. Profit Margin Operating Expenses Operating Income Operating Margin Net Income EPS
2021
2020
$16,434 $9,763 $7,934 $4,353 48% 45% $3,877
$2696
$4,069
$1,657
25%
17%
$3,435
$1,575
$2.79
$1.29
Industry Outlook:
Thesis 1: Nvidia has released their new cloud gaming service called NVIDIA GeForce NOW. It is a membership-based service that allows users to stream up to 1440p resolution games at 120 FPS. AMD announced that they will be supplying their Ryzen Threadripper RPO CPUs for the new service. Phil Eisler, the VP and GM of GeForce NOW stated that AMD supplies the best CPUs providing best memory and performance for the gaming workload of the current era. Thesis 2: AMD's massive $35 billion purchase (all-stock deal, so no burden of debt) of chip company Xilinx, which is an American technology company that is primarily a supplier of programmable logic devices, is finally set to close on February 14th. Xilinx’s deep strategic partnerships across wired and wireless communications, automotive, industrial and test, aerospace and defense, and measurement and emulation markets complement AMD partnerships in PC and data center markets. Xilinx further strengthens AMD financial model, supplying a diverse set of end markets based on long product cycles across multiple, high-margin businesses. Xilinix invented preprogrammable CPU’s or Field Programmable Gate Arrays (FGPAs), and owns over half of this specific market share Thesis 3: AMD has seen a 75% YoY revenue growth in the data center segmentation of their business which accounts for 22% of their total revenue in the most recent quarter. AMD recently released their 3rd gen EPYC processors which are currently the fastest and most efficient on the market and plan to release their 4th gen processors in late 2022. Through 2026, there is expected to be a 43.8% demand increase of the data center industry to a market cap of $53.6 billion, and AMD is taking advantage of this expected growth. Valuation: Target price of $168.73 with FYE2023 multiple of 36.6 and FYE2023 EPS of 4.61. Trading overweight but with high growth potential. BUY rating.
Financial Investment Review
Risks: • Chip shortage and increase in prices • Shift away from at home working • Xilinix acquisition • Interest Rates