Company Name: Advanced Micro Devices, Inc.
Current Price: $75.80
Target Price: $88.00
Projected Yield: 16%
Time Line: 6 months
AMD is one of the world's largest manufacturers of integrated circuit electronics. The company's product base include central processing units, GPU's and adapters, motherboards, RAM, and solid state drives. AMD also designs and manufactures server hardware.
What's the Idea?
Capitalize on a stock that is likely to rise with good results in Q3 2020 and upbeat management predictions.
Buy AMD Shares >>
Why Trade AMD?
Reason 1: Strong Financial Result in Q3 2020
The earnings in Q3 2020 amounted to $2.80B, which is $240M higher than the initial market expectations. This means 56% YoY, driven mainly by gaming console and server processor segment growth, which added 116% YoY. The growth was largely due to the rapid launch of the next generation of the PlayStation 5 and Xbox Series X game consoles. In addition, EPYC server processor sales doubled, which is a record for the company.
The processor and graphic segment grew by 30.60% YoY and 21.90% QoQ, which was due to Ryzen processor sales. The gross margin increased from 41.70% last year to 44.40% in Q3 2020, while the operating income was a whopping $449M against $186M last year, and operating margin rose from 10.30% in 2019 to 16.00% in 2020 with good earning growth. The net income in Q3 2020 was $0.32 per share, which is $0.02 ahead of the market expectations.
Reason 2: AMD Management Good Predictions
The management meeting was dedicated to a financial statement, where it was announced that Ryzen processor shipments have grown with record values despite the pandemic. The new Zen 3 processors are 19% faster than the Zen 2 processors, and, in 2020, 105 laptops with AMD processors were launched.
In terms of graphics, the company again showed a decline in earnings, while in terms of new game consoles launch, AMD expects significant rise in Q3. PlayStation5 and Xbox Series X sales may rise with the lockdown measures and video game market growth.
Sales are also expected to increase in the EPYC server processor segment, which posted significant growth in Q3. All this means that AMD is highly competitive in this area. In Q4, the management expects to receive $3B and a gross margin of 45% against an initial expectation of $ 2.62B. Operating expenses are projected at 25% of earnings, which means around 20% of operating margin in Q4.
Reason 3: AMD's Acquiring 100% of Xilinx Shares
AMD also reported the acquisition of a 100% stake in Xilinx, a US developer and manufacturer of programmable logic integrated circuits. The deal is worth approximately $35B and will be paid with AMD shares at a multiplier of 1.72 per Xilinx share.
AMD believes this acquisition will enable the company to secure the strongest portfolio of high-performance products in the CPU, graphics, programmable logic, and semi-custom solutions industries. It will also enable the new sector development, such as artificial intelligence and software-defined infrastructure.
The deal is expected to be closed by as long as late 2021. The acquisition of Xilinx could be profitable in the long term due to the potential increase in market share.
How to Use the Idea
- Buy AMD shares at $75.80.
- Allocate no more than 2% of your portfolio amount. To build a balanced portfolio, you can use our analysts' recommendations for an USD or a EUR portfolio.
- Sell the stock when the price is at $88.00 per share.
How to Buy AMD Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: Go to the Web Terminal section, type AMD.US (AMD ticker in the NASDAQ) in the search box, and select Advanced Micro Devices in the search results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the dialog that will show up, type AMD.US ( AMD ticker in the NASDAQ) and select Advanced Micro Devices in the search results. You will then see AMD stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy AMD shares and invest into the industry leader with impressive results!
Buy AMD Shares >>
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