AMD: The Bull Is Ready To Strike

seekingalpha2023-03-30

SummaryAMD's shares are up by 75% from their October lows but the rally might still continue.The chipmaker's market share gain story remains alive and its upcoming key launches stand to catapult its ...

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Upswing118
2023-03-31
Upswing118
Great stock. 🚀 higher
Blessedme
2023-03-30
Blessedme
Amd going up to 150 soon
ck6ng
2023-03-30
ck6ng
👍
Switzerland Heng
2023-03-30
Switzerland Heng
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The general premise behind this line of thought is that this rally may be unsustainable since we're in a recessionary environment. But there's reason to believe the rally could still continue. AMD's shares are trading at a steep discount compared to industry comparables, its market share gain story is still intact and its upcoming releases only stand to catapult its growth going forward. Let's take a closer look to gain a better understanding of it all.Share Gain StoryLet me remind readers that AMD was considered to be a failing company till about 7 years ago, its products were not in demand and investor discussions revolved around when it would go bankrupt. But thanks to certain key personnel, AMD was able to bring Zen architecture to its SKUs and stage an incredible turnaround. It went from being just another chip company, to a fierce rival of Nvidia (NVDA) and Intel (INTC) in a span of just a few years. This is a commendable feat and an enviable position to be in.AMD's revenue by segmentBut AMD's growth trajectory hasn't saturated yet - the chipmaker continues to innovate and launch new products, to catapult its own growth. For instance, AMD launched data center accelerators in the last couple of years which are now giving fierce competition to Nvidia's finest. It launched another monster accelerator, termed MI300, this January to up the ante in the server and data center space. Besides, AMD launched a full bouquet of its Zen 4-based 7000-series CPUs and a couple of high-end 7000-series GPUs in the past 4-5 months. This aggressive approach towards competitive product releases, in quick successions, has allowed AMD to consistently gain market share in the majority of its recent quarters.AMD's market shareBut the chipmaker's management isn't sitting idle and counting its laurels. They're now gearing to release budget GPUs targeting the mainstream gaming community, a full range of mobile chips and a stack of 13 server-centered EPYC SKUs under its Zen 4-architecture banner, in the coming few months. These launches will only contribute towards AMD's market share gain story and catapult its growth higher, possibly even during in the currently-prevalent recessionary environment. This prospect of ongoing market share gains, in my opinion, is one of the major reasons why growth-seeking investors should consider owning AMD's shares for the multi-year time horizon.Easing CompetitionSecondly, things are sailing smoothly at AMD's camp. The company has partnered with Taiwan Semiconductor (TSM) for its chip fabrication, and its manufacturing as well as node advancements are going per their scheduled timelines. TSM's N3E node offers 60% more logic density compared to its own N5 node that's currently being used in AMD's Zen 4 SKUs. This node will become commercially available this year and AMD will be tapping that for the release of its Zen 5-based SKUs, arguably, in the second half of 2023. In simple terms, AMD will be able to deliver massive performance gains compared to its latest Zen 4 chips, that are already trading blows with Intel's finest.Intel, on the other hand, is still trying to get on top of its fabrication game. It cancelled Rialto Bridge chips that were due for release in the next 12 months and it delayed Falcon Shores until 2025. Its 14th gen CPUs will be fabricated using Intel 4 (or 7nm conventionally speaking) node which will be comparable to TSM's N3E in terms of transistor density. But the 14th gen SKUs are been built with a mobile-first approach and its desktop SKUs are limited to just 6 performance cores, meaning they'll struggle to compete with AMD's 8 core-plus SKUs in terms of compute performance.Essentially, I believe AMD has a 12-24-month process lead over Intel, due to the latter's ongoing delays and questionable product roadmaps. This will set up AMD for continued market share gains at Intel's expense and, as a result, its pace of revenue growth is likely to remain at elevated levels in the foreseeable future.Attractive ValuationA major point of contention amongst AMD bears is that its shares are arguably overvalued. The stock is trading at over 6-times its trailing twelve-month sales so the pessimism is warranted. But valuations are a bit more nuanced than that and the following chart will shed more light on the matter.AMD's relative valuationThe Y-axis plots the Price-to-Sales multiples for over 50 semiconductor stocks listed on US bourses. Note how AMD is vertically positioned more or less in the middle, indicating that its trading around industry average levels. But Nvidia, one of AMD's key rivals in the GPU space, is vertically positioned at the top end of the chart. So, AMD appears to be trading at a steep discount compared to its close competitor.Now, let's shift attention to the X-axis which plots the revenue growth rates for the same set of companies. Note how AMD is horizontally positioned towards the right end of the chart. This indicates the chipmaker's pace of revenue growth is much higher than most of the other semiconductor names in our study group, also leaving behind Nvidia by a huge margin.The collective takeaway from both the axes here is that AMD's revenue is growing at a breakneck pace but its shares are still trading around industry average levels. There are, in fact, just 5 other semiconductor stocks that grew revenue faster than AMD and are trading at a relative discount. This leads us to the conclusion that AMD's shares are still undervalued at current levels and have ample room for appreciation, given its rapid pace of revenue growth.Final ThoughtsThe takeaway here is that AMD has lots going for it. Its management continues to execute flawlessly, its engineering teams are bringing competitive products to the market that are constantly winning market share and the stock is significantly undervalued compared to many of the other popular semiconductor names. Due to these reasons, I remain bullish on AMD. Readers and investors with a multi-year time horizon, may want to accumulate the chipmaker's shares on potential price corrections. Good Luck!","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9941627617,"gmtCreate":1680219418840,"gmtModify":1680219423041,"author":{"id":"4087685930931350","authorId":"4087685930931350","authorIdStr":"4087685930931350","name":"Upswing118","avatar":"https://static.tigerbbs.com/5ee810deeb4fd3c3d863b49cef1d9956","vip":1,"crmLevel":5,"crmLevelSwitch":1,"idStr":"4087685930931350"},"htmlText":"Great stock.&nbsp; 🚀 higher","listText":"Great stock.&nbsp; 🚀 higher","text":"Great stock. 🚀 higher","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9941627617","repostId":1178250878,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9941614048,"gmtCreate":1680188790984,"gmtModify":1680188794764,"author":{"id":"4089118747466230","authorId":"4089118747466230","authorIdStr":"4089118747466230","name":"Blessedme","avatar":"https://community-static.tradeup.com/news/3757be1781f0fa5d0ed4ee927cb8cc38","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"4089118747466230"},"htmlText":"Amd going up to 150 soon","listText":"Amd going up to 150 soon","text":"Amd going up to 150 soon","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":7,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9941614048","repostId":1178250878,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9941615222,"gmtCreate":1680188576367,"gmtModify":1680188580053,"author":{"id":"3567930705356651","authorId":"3567930705356651","authorIdStr":"3567930705356651","name":"ck6ng","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3567930705356651"},"htmlText":"👍","listText":"👍","text":"👍","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9941615222","repostId":1178250878,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9941616509,"gmtCreate":1680187993101,"gmtModify":1680187997214,"author":{"id":"3566203796333803","authorId":"3566203796333803","authorIdStr":"3566203796333803","name":"Switzerland Heng","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3566203796333803"},"htmlText":"Share your opinion about this news…","listText":"Share your opinion about this news…","text":"Share your opinion about this news…","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9941616509","repostId":1178250878,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":44,"commentSize":4,"repostSize":4,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.1","shortVersion":"4.28.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1178250878"}