Advanced Micro Devices, Inc.

AMD Details

Advanced Micro Devices, Inc. (NASDAQ: AMD) is a semiconductor company established in the United States. For the PC, gaming, datacenter, and embedded markets, the com offers x86 microprocessors (CPUs), accelerated processing units (APUs), discrete graphics processing units (GPUs), and semi-custom System-on-Chip (SOC) solutions and chipsets.

Latest News:

• Key Appointment: On April 18, 2022, AMD a Hasmukh Ranjan was named senior vice president and Chief Information Officer (CIO) effectively immediately. Ranjan formerly worked at Xilinx as the company's CIO. Ranjan is in charge of the worldwide IT group, which provides strategic management of the company's IT infrastructure, manages vital technology applications and systems, and offers sophisticated solutions to make business processes more secure and productive.

FY21 Results:

• Surge in Topline: The company reported a YoY growth of 68.33% in net revenue to USD 16.43 billion in FY21 (ended December 25, 2021) from USD 9.76 billion in FY20 (ended December 26, 2020), driven by growth in both the segments.
• Growth in Profitability: In FY21, AMD's net income increased to USD 3.16 billion from USD 2.49 billion in FY20.
• Cash and Debt Position: The company had USD 3.61 billion in cash and cash equivalents (including short-term investments) as of December 25, 2021, and total debt of USD 313 million.

Key Risk:

• Receivable Concentration Risk: As of FY21, the top three customers with the highest accounts receivable balances each accounted for approximately 20%, 15%, and 9% of the total consolidated accounts receivable amount, respectively, and 18%, 17%, and 6% of the total consolidated accounts receivable balance as of FY20. Therefore, excessive dependence on a specific customer for income might be detrimental to the company's long-term financial health.

Outlook:

Financial Outlook – Non GAAP (Source: Q4FY21 Earnings Presentation, February 01, 2022)

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

AMD's stock price has fallen 25.88% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 72.50 to USD 164.46. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 109.69.

Considering the significant correction in the stock price, positive outlook, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the closing price of USD 90.69, up 2.89% as of April 25, 2022.

Three-Year Technical Price Chart (April 25, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.