Credit Suisse On Xilinx Deal, AMD's Q3: The per-share deal value of $143 represents a 25% premium as opposed to the 30% median premium for the semiconductor industry, Credit Suisse analyst John Pitzer said in a note.
The combined company on a trailing 12-month basis would have had revenues of $11.6 billion, gross margins of 51%, operating margins of 21% and free cash flow of $1.8 billion, the analyst said, citing the company.
This compares to AMD's standalone gross margins of 45%, operating margins of 17% and free cash flow of $154 million, he said.
The deal boosts AMD's total addressable market from $80 billion to $110 billion, Pitzer said.
The incremental opportunity comes from Xilinx's exposure to datacenter, networking and auto/industrial, the analyst said.
AMD's third-quarter revenue and EPS outperformance was due to strong performances by the Enterprise, Embedded and Semi-custom and Computing & Graphics segments, he said.
The C&G segment's results were driven by record Ryzen revenues and units and the 12th consecutive quarter of share gains, the analyst said. The EESC segment, meanwhile, benefited from second generation EPYC revenues more than doubling year-over-year and strong semi-custom revenues from Sony Corp (NYSE: SNE) and Microsoft Corporation (NASDAQ: MSFT) console ramps, he said.
The better-than-expected fourth-quarter guidance reflects continued EPYC share gains, momentum in Ryzen, the Radeon 6000 GPU product launch and sequential growth in semi-custom revenues, Pitzer said.
AMD is on track to ship the next-gen Milan server processor based on Zen 3 architecture in the fourth quarter, with volume production expected in the first quarter of 2021, the analyst said.
Credit Suisse also sees higher graphics revenues ahead, with Ryzen 5000 and cloud-based CDNA wins.
Related Link: 3 Takeaways On AMD's New Ryzen 5000 Series
AMD Could Double In Size, Rosenblatt Says: With new product cycles coming by way of Ryzen 5000 and Milan EPYC3, the momentum seen in the third quarter is likely to continue into 2021, Rosenblatt analyst Hans Mosesmann said in a note.
AMD's acquisition of Xilinx makes sense given that the data center market is in massive flux and offloading dynamics are becoming ever more important, the analyst said.
"With Intel Corporation (NASDAQ: INTC) continuing its woes, we see no reason why AMD can't capture 50% of the entire x86 CPU market in coming years on technology/product roadmaps, accelerating design pipelines, increasing attach rates of GPUs to optimize EPYC server CPUs, etc," he said.
AMD's ability to have both a strong x86 CPU and GPU roadmap will have significant and sustainable advantages in the world of computing that Intel and NVIDIA Corporation (NASDAQ: NVDA) do not have, Mosesmann said.
Given the secular opportunity and $110-billion TAM, inclusive of the Xilinx acquisition, AMD's prospects of doubling in size over the next several years are quite achievable, the analyst said.
Rosenblatt Securities reiterated a Buy rating on AMD with a $120 price target.
AMD's Share Gains Accelerating : AMD's new product cycle ramp and relatively lower share of the data center market, especially in enterprise, explains the anomaly between its near-term outlook and that of its rival Intel, Benchmark analyst Ruben Roy said in a note.
AMD's market share gains are accelerating, the analyst said.
The Xilinx deal is highly accretive, and the combined company will benefit longer-term from revenue synergies in some of the fastest-growing markets for semiconductors, he said.
"For now, with year-over-year metrics likely to compress as we look ahead into 2021, and with competition likely to become more challenging next year, we remain Hold rated on AMD shares."
Benchmark has a Market Weight rating on AMD.
AMD Price Action: At last check, AMD shares were slipping 2.8% to $76.67, dragged by the broader market sell-off.
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