For Immediate Release
Chicago, IL – February 10, 2022 – Zacks Equity Research shares Advanced Micro Devices AMD as the Bull of the Day and Align Technology ALGN asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on The Walt Disney Company DIS, Uber UBER and Twilio TWLO.
Here is a synopsis of all five stocks:
Bull of the Day:
Advanced Micro Devices has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focused company from a pure-bred consumer PC and gaming chip provider.
And after another beat-and-raise quarter -- where the Lisa Su starship offered guidance for Q1 EPS that was 30% above consensus Street estimates -- the stock is on its way back to the old highs.
AMD has emerged as a strong challenger to NVIDIA's dominance in the GPU (graphic processing unit) market based on its Radeon technology. Launch of 7 nanometer (nm)-based AMD Radeon RX 5700-series gaming graphics card family featuring RDNA architecture, high-speed GDDR6 (Graphics Double Data Rate type 6) memory and support for the PCIe 4.0 interface, has helped the company increase presence among gamers.
I've been a big AMD bull since last March when you could buy it at $75. I last wrote about it publicly in late October and here's what I said...
Why I've Been Pounding the Table on AMD Since $75
I'm going to share more details about this fantastic growth -- plus a bandwagon full of analyst reactions -- but first let me explain why I was telling everyone who would listen this past spring to buy AMD at $75.
Essentially, it was all about how well CEO Lisa Su and her teams were executing in the dynamic, cutting-edges of semiconductor innovation, just like my favorite GPU-maker NVIDIA.
Plus, not only was she eating Intel's lunch at every turn in PCs and notebooks with sub-10 nanometer technology, the stock was consistently trading at half the valuation of NVDA.
Even today, AMD is trading for under 8 times next year's projected sales of $18.8 billion while NVDA leaves the atmosphere (for chips) at over 21X sales!
See an excellent primer on the victory over Intel here...
Release the Ryzen! AMD Roars in the Nanometer Wars
Stunning Q4 and Guidance
AMD reported fourth-quarter 2021 non-GAAP earnings of 92 cents per share, which surpassed the Zacks Consensus Estimate by 22.67%. The bottom line soared 77% year over year and 26% sequentially.
Revenues of $4.83 billion outpaced the Zacks Consensus Estimate by 6.69% and surged 49% year over year. On a quarter-over-quarter basis, the top line increased 12%.
Robust performance by the Computing and Graphics, and Enterprise Embedded and Semi-Custom segments drove year-over-year improvement, as AMD benefitted from strong Ryzen, Radeon, and EPYC processor sales.
In my Zacks TAZR Trader portfolio, we already had an AMD position and we were ready to be buyers again near $100. But after the market sell-off lost momentum, and AMD delivered the goods, we had to settle for adding near $120. Here's what I told our members...
AMD Has the Green Light for New Highs
Our bright spot today was a nice beat and stunning outlook from AMD.
Shared gapped up over 10% but met sellers as some analysts only raised price targets into the $130-140 zone like BMO and Truist.
But the Lisa Su starship managed to keep 5% on massive volume of 180 million shares -- the most since it surged to new highs above $120 back in August.
Let's hear what the bulk of positive analyst reactions were focused on in this report...
AMD price target raised to $155 from $145 at Jefferies: Analyst Mark Lipacis noted the remarkable results and outlook with Q4 EPS and Q1 EPS guidance that were 21% and 31%, respectively, above consensus. After about 600 basis points of server CPU revenue share gains in 2021, he expects another 200-300 points in server share gains in Q1, adding that he believes its next-gen server significantly increases its average selling prices due to much higher core counts.
AMD price target raised to $160 from $150 at Cowen: Analyst Matthew Ramsay noted the guide to 31% growth to start the year which was well above his expectations. He said market share gains are driving significant growth in PCs and servers, further amplified by GPU/console upside. Ramsay said the guidance to start the year shows visibility into customer-driven demand and improved supply.
AMD price target raised to $160 from $140 at Raymond James: Analyst Chris Caso said "AMD's December quarter results were exceptional," and thinks there's an expectation that numbers will move higher throughout the year as more supply becomes available, particularly in 2H22.
AMD price target raised to $165 from $155 at KeyBanc: Analyst John Vinh noted AMD's strong results and guidance, both of which were above expectations driven by strength in client PC, which grew DD% year-over-year, and data center, which more than doubled year-over-year and exited 2021 at mid-20% of total revenues. Accordingly, AMD sees over 30% revenue growth in 2022 and, Vinh noted, management believes it has secured enough capacity to support this growth.
AMD price target raised to $180 from $175 at Susquehanna: Analyst Christopher Rolland said upside was broad-based across all segments and should continue into 1Q22 as better demand and supply both contribute to March guidance that now bucks the typical first-quarter seasonal decline. He said the company is buying stock, $1B worth in just the last few weeks, and he recommends investors do the same. As the second-biggest bull -- next to me -- Rolland gives sound advice.
I'll reiterate my stance on AMD: As long as NVDA can trade for over 15X sales (currently 19.5X next year's $31.5B), then AMD is a steal under 10X sales (currently 6.4X next year's $22B). That's why it has the green light to go for the old highs... and make new highs.
(end of TAZR commentary from Feb 2)
Since then, revenue estimates for AMD next year have been boosted to over $24 billion. So even with the stock's rally to $133 and $153 billion, AMD is still trading for 6.4X sales. With NVDA's rally, its price/sales ratio has edged up to 20X.
As I told Zacks Ultimate members in a private member update on Monday, either NVDA is going to come down, or AMD is going for new highs. I think you know where my money is.
Bear of the Day:
Align Technology last week delivered fourth-quarter 2021 EPS of $2.83, up from the year-ago $2.61, reflecting growth of 8.4%. The quarter’s EPS surpassed the Zacks Consensus Estimate by 6.4%.
GAAP EPS for the quarter was $2.40, up from the year-ago EPS of $2.00, reflecting an uptick of 20%.
Full-year adjusted EPS was $11.22, reflecting a 113.7% increase from the year-ago period. However, the metric surpassed the Zacks Consensus Estimate by 1.2%.
Full-year GAAP EPS was $9.69, reflecting a 56.8% fall from the year-ago period.
Revenues surged 23.6% year over year to $1.03 billion in the quarter, beating the Zacks Consensus Estimate by 1.4%. Full-year revenues were $3.95 billion, reflecting a 59.9% increase from the year-ago period.
Guidance and Analyst Downward Revisions
Align Technology has provided its financial outlook for 2022, assuming no new notable surges post the current wave, no significant practice disruptions, and no material supply chain problems throughout the year.
The company expects net revenue growth in the band of 20-30% despite the challenges posed by the Omicron variant. The Zacks Consensus Estimate for 2022 revenues is pegged at $4.76 billion.
The company expects 2022 operating margin to be about 24% on a GAAP basis. Meanwhile, adjusted operating margin is estimated at around 3 points higher than the GAAP operating margin, excluding stock-based compensation and intangible amortization from certain acquisitions.
Based on these results, analysts took down this year's EPS consensus estimate from $13.34 to $12.70. And next year was cut from $16.15 to $15.56. That's why Align is in the cellar of the Zacks Rank.
Analysts Lower Price Targets But Remain Bullish
I've been an ALGN bull for 5 years as I considered the impact of a digital aligner solution being able to serve tens of millions of patients in China and India. The company and the stock certainly achieved many big goals since then.
And it sure looked like a buying opportunity under $500. Now that the stock has rallied out of that hole, it also looks like a lot of pessimism was priced-in. In that sense, the earnings and mixed guidance were like a relief that things were not worse. So let's see where analysts stand now...
Align Technology price target lowered to $625 from $675 at Stifel: Analyst Jonathan Block observed that Q4 cases missed his "Street low" 651,000 estimate by about 20,000 and Q1 implied case volume guidance is likely about 70,000-80,000 below where the Street was. Coupled with a 2022 operating margin view of 27%, versus his prior view of 28%-plus, Block thinks it is likely that the Street's 2022 EPS estimate will come down, which he noted "usually equates to a pullback in Align's stock."
Align Technology price target lowered to $722 from $782 at Credit Suisse: Analyst Matt Miksic attributed his adjustment primarily to a lower target multiple. The analyst notes Q4 sales exceeded expectations, driven by strength in iTero scanner sales offset by COVID-related demand and utilization pressure on Clear Aligners.
Align Technology price target lowered to $650 from $745 at Baird: Analyst Jeff Johnson noted January trends improved, and management believes 20%+ growth this year for both global revenue and case shipments remains achievable. Johnson believes shares remain under-valued and under-appreciated.
Finally, Piper Sandler analyst Jason Bednar reiterated his Overweight rating on Align Technology with a $740 price target following the company's Q4 results. Management stood behind delivering 20%-plus revenue growth in 2022, inclusive of 20% Invisalign volume growth he noted. He believes the stock's risk/reward looks "incredibly attractive," but wouldn't be surprised to see the shares remain range-bound until industry data points and channel checks confirm clear aligner demand is rebounding post-omicron.
Bottom line on Align: I think the stock is a buy near $500, especially after it looks like shares discounted the pessimism even before earnings. So now we just have to see if analysts stop lowering estimates and start raising them. The Zacks Rank will let us know.
Markets Keep Rally Going; DIS, UBER, TWLO Up on Earnings
Indexes closed near session highs Wednesday, on having already baked-in a 25 basis-point rate hike for March (but not a 50-bps raise) and a waning Omicron variant opening yet another light at the end of the tunnel. The Dow rose another +306 points, +0.86% on the day; the Nasdaq performed even better: +296 points or +2.08%; the S&P 500 put up another +1.45% of its own; and the Russell 2000 rides a now-four-day winning streak, +1.86%.
Wholesale inventories for December were revised down from +2.5% last reported to +2.2% this time around — demonstrating a slight loosening of goods availability that may lead to softer pricing in the near future. The 10-year Treasury yield continues to moderate at 1.95%, while the 2-year is now at 1.37%. Pricing in the hike, these are now not unexpected moves. Even more importantly, they are now more or less accounted for in the greater indexes.
The Walt Disney Company shares rose +8.5% after Wednesday’s close on much better earnings and sales than expected in its fiscal Q1: earnings of $1.06 per share zoomed past the 57 cents in the Zacks consensus (and more than tripled the 32 cents per share reported in the year-ago quarter), on revenues of $21.8 billion, which beat the $21.2 billion our analysts were expecting.
Disney+ subscriber numbers came in higher than anticipated: 129.8 million versus 125.8 million expected. Its Parks, Experiences and Products segment jumped on looser pandemic policies, with growth of over 100% year over year. The company never gives guidance, but has now beaten earnings estimates in six of the past seven quarters.
Uber also enjoys a nice bump post-earnings release, +6.5% after gaining +4.8% in anticipation of its Q4 report: swinging to earnings of 44 cents per share from an expected -33 cents, the ride-share leader also accelerated past expectations on the top-line: $5.78 billion versus $5.39 billion. Q4 Gross Bookings outpaced expectations, while Delivery and Trips came up a tad short estimates. Freight, on the other hand, brought in $1.08 billion for the quarter, from an expected $807.8 million.
Cloud software firm Twilio shares rocketed +23% following its Q4 report, after a basically as-expected -20 cents per share on the bottom line was eclipsed by a big beat on the top-line: $842.8 million versus $768.9 million in the Zacks consensus. Guidance for Q1 was more of the same: lower on the bottom line but higher on the top. And with a growth tech company like Twilio, revenues are far more important than earnings at its current stage.
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Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
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