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Advanced Micro Devices Inc - Stock Quote AMD

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Morningstar's Advanced Micro Devices Inc Stock Analysis

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AMD Calls for Substantial Growth at 2022 Analyst Day; Shares Undervalued Relative to $130 FVE

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

On June 9, AMD hosted its financial analyst day at which management outlined its outlook for the firm. In addition to a long-term financial model that called for average revenue growth of 20% (versus our five-year revenue CAGR assumption of 19%) and non-GAAP gross margins north of 57%, AMD provided updated roadmaps for its CPU and graphics processing unit, or GPU, products in both the PC and data center arenas. Notably, the firm expects its total addressable market, or TAM, to be about $300 billion in the coming years. We view the data center market TAM ($125 billion) most favorably, as it includes CPUs, GPUs, field programmable gate arrays, or FPGAs, and data processing units, or DPUs. While we anticipate strong double-digit growth for AMD in this segment going forward, we also acknowledge both Nvidia and Intel are formidable competitors across these chip solutions. In the near term, we remain most impressed with AMD’s execution on its product roadmap, particularly with its EPYC server CPU family that continues to gain share at Intel’s expense. We are maintaining our $130 fair value estimate for narrow-moat AMD, and we think shares are attractive at current levels.

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Advanced Micro Devices Inc's Company Profile

Business Description

Advanced Micro Devices designs microprocessors for the computer and consumer electronics industries. The majority of the firm's sales are in the personal computer and data center markets via CPUs and GPUs. Additionally, the firm supplies the chips found in prominent game consoles such as the Sony PlayStation and Microsoft Xbox. AMD acquired graphics processor and chipset maker ATI in 2006 in an effort to improve its positioning in the PC food chain. In 2009, the firm spun out its manufacturing operations to form the foundry GlobalFoundries. In 2022, the firm acquired FPGA-leader Xilinx to diversify its business and augment its opportunities in key end markets such as the data center.

Contact
2485 Augustine Drive
Santa Clara, CA, 95054
T +1 408 749-4000
Industry Semiconductors
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 25, 2022
Stock Type Cyclical
Employees 15,500

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