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Advanced Micro Devices Inc AMD

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Morningstar’s Analysis

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AMD Continues to Gain Share in Q3; Stock Modestly Overvalued Relative to Unchanged $109 FVE

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

AMD reported its eighth consecutive quarter of double-digit revenue growth thanks to broad-based PC, server, and game console strength. Management is confident in the firm’s product pipeline for 2021 and now expects 65% revenue growth for the full year (up from 60%). We believe this guidance should be easily attainable, particularly as Intel deals with manufacturing challenges. We are maintaining our fair value estimate for narrow-moat AMD of $109 per share on a probability-weighted basis as we await AMD’s acquisition of Xilinx. We assess AMD’s standalone fair value at $98 per share. We assign a 75% probability of AMD’s acquisition of Xilinx closing, and our fair value for the combined entity would be $112 per share. With shares up 35% over the past three months, we recommend prospective investors wait for a pullback.

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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 2020, the firm agreed to acquire 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
Sector Technology
Industry Semiconductors
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 25, 2021
Stock Type Cyclical
Employees 12,600

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