As you might know, Advanced Micro Devices, Inc. (NASDAQ:AMD) just kicked off its latest second-quarter results with some very strong numbers. Advanced Micro Devices beat earnings, with revenues hitting US$1.9b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 11%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from Advanced Micro Devices' 38 analysts is for revenues of US$8.88b in 2020, which would reflect a solid 16% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 68% to US$0.90. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$8.41b and earnings per share (EPS) of US$0.85 in 2020. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 38% to US$72.89per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Advanced Micro Devices analyst has a price target of US$120 per share, while the most pessimistic values it at US$8.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Advanced Micro Devices' growth to accelerate, with the forecast 16% growth ranking favourably alongside historical growth of 13% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.6% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Advanced Micro Devices to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Advanced Micro Devices following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Advanced Micro Devices. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Advanced Micro Devices analysts - going out to 2023, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Advanced Micro Devices that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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