Advanced Micro Devices AMD 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 NVDA 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research