AMD: My Top Stock Pick For 2022 And The Next Decade

Seeking Alpha2021-12-30

SummaryAMD has been a top performer in 2021, and 2022 should be another great year.The company has captured substantial market share in the CPU segment, and it's not likely to give up gains.AMD should...

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Comments

Meshaarias72
2021-12-30
Meshaarias72
I like AMD but still don’t take stop forwards [Grin]
AnT
2021-12-30
AnT
Ok
- AnT:
  ok
TraderHan
2021-12-30
TraderHan
Winn
davidmingwei
2021-12-30
davidmingwei
Ok
Grit100
2021-12-30
Grit100
Ok
- Grit100:
  .
Alkid
2021-12-30
Alkid
Okay

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The company has tremendous momentum, and it should continue to increase its market share in the CPU segment moving forward. Therefore, we will likely continue seeing substantial revenue growth from the chipmaker in future quarters. Moreover, AMD is growing more profitable and should continue expanding EPS in the coming years. The company's stock price should have another solid year in 2022. Moreover, AMD's perpetual growth and increasing profitability should enable the company's stock to advance notably higher in future years.AMD 3-Year ChartSource: StockCharts.comWe see that AMD has been on a steady march higher for several years now. The stock has made about a 750% move in just the last three years, making it one of the top-performing large-cap tech stocks on Wall Street in recent years. While shares became technically overbought during the recent run-up, we should see more upside from AMD after a consolidation phase early next year. I also believe that any substantial pullbacks in AMD should be regarded as buying opportunities if they occur in the next few months.Why AMD Continues To SurgeAMD's CPU market share hit a 15-year high recently, as the company's market share continues to climb in the ultra-competitive x86 market. Now, every AMD gain is essentially an Intel (INTC) loss here, and it has been all about AMD lately.Source: cpubenchmark.netWe've seen AMD's total CPU market share increase substantially in recent years. The company's market share has surged from a low of about 20% in 2015-2018 to roughly 40% recently. While we saw a higher market share in the mid-2000s, I don't believe that AMD's recent rise will be transitory like 15 years ago. AMD is much more established and far better capitalized now. Moreover, the company's execution, performance, and chip technology have topped Intel's in recent years. Therefore, it's not surprising to see market share gains and extreme stock outperformance over Intel lately.Source: cpubenchmark.netIf we look at the desktop market where a lot of the gaming occurs, AMD briefly overtook Intel this year, crossing the 50% market share line for the first time since 2006. AMD has seen a rapid rise in this segment from the company's 20%-25% share about five years ago. Due to AMD's strong momentum and solid product line, the chipmaker could continue to capture more share in the desktop market in future years. Given the company's trajectory, AMD has a substantial probability of becoming the leader in the desktop CPU segment, in my view.Source: cpubenchmark.netThe critical battleground remains the laptop market, where AMD's market share was down to only around 8% in recent years. However, the company has recently made significant advances capturing nearly 25% of this lucrative market. The move away from cheaper, low-performance devices has helped AMD in this segment. Moreover, the trend toward higher-end performance laptops should enable AMD to retain a larger share of the laptop market in future years. Furthermore, AMD's robust momentum should allow the company to continue innovating, allowing it to grow its market share from here.AMD vs. IntelData by YChartsIn recent years, we see AMD's dramatic outperformance over Intel, and the stock's trajectory correlates closely with AMD's continued market share gains in the CPU market. However, even if the company's market share gain slows down or stagnates in the future, I don't believe that AMD's stock will crash. AMD has an established place in the market now. The company's growth should continue, and even if the stock moves sideways or slightly lower in the near-term, intermediate and longer-term gains should follow.Valuation May Seem High But The Growth Is Worth ItAMD's consensus EPS forecasts are $3.13 in its next four quarters. This figure puts AMD's forward P/E ratio at approximately 49. While 49 times forward EPS estimates may seem high, AMD has the growth to support such a multiple.EPS EstimatesSource: SeekingAlpha.comMost analysts anticipate AMD will deliver robust double-digit EPS growth for at least several more years moving forward. Consensus EPS estimates are $3.99 in 2023, roughly a 50% rise over this year's anticipated $2.64 result. Moreover, AMD has illustrated a tenacity for surpassing analysts' expectations.EPS SurprisesSource: SeekingAlpha.comAMD has surpassed consensus estimates in seven of its last eight quarters. The company has beat forecasts by an average of 14% in its previous four quarters. Therefore, I anticipate that we will see more outperformance moving forward. Even if AMD beats consensus EPS estimates by an average of only 10% in 2023, the company will deliver about $4.40. This EPS figure implies that AMD is trading at around 35 times 2023 EPS estimates right now. However, due to the company's powerful momentum, robust growth should continue well beyond 2023.Revenue EstimatesSource: SeekingAlpha.comWe see that double-digit revenue growth should continue at AMD, and this trend of solid revenue growth is likely to persist well beyond 2023. While consensus estimates are $22 billion in 2023, higher-end forecasts imply that the company can deliver north of $24 billion. These are explosive figures provided that AMD reported Q3 2020 revenues of $2.8 billion.Q3 2021 Financial InformationSource: AMD.comWe see that AMD's revenues surged by a whopping 54% YoY in the company's latest earnings report. While next year's Q3 consensus estimates are for an 18% YoY increase, I suspect that AMD can surprise higher, delivering revenue growth north of 20%. In addition to the company's substantial sales growth, AMD is becoming increasingly more profitable. Last quarter we saw gross profit explode to more than $2 billion, a 70% YoY increase. Moreover, gross profit margin increased substantially from 44% in Q3 2020 to 48% last quarter. Net income skyrocketed by 137% from $390 million to $923 million for the same time frame. We can see that AMD is becoming increasingly more profitable with scale, and we will likely continue to see high profitability growth from AMD as the company advances.Here is what AMD's financials could look like in future years:Source: Author's MaterialThe Bottom LineI expect AMD will continue to expand sales at 15%-20% annually through 2025, after which the company's revenue growth should slow into the 8%-10% range toward the end of the decade. However, AMD's EPS should be considerably higher by this time, roughly $15-$20. Therefore, even a substantially lower P/E multiple should provide us with a stock price much higher than we see today. If AMD continues to execute well in the coming years, I expect the company's share price to appreciate to about $500 by 2030.Risks To AMDDespite my bullish outlook for the company, investors must remain aware that risks exist. AMD has a relatively high multiple, and some consider the stock overvalued right now. Therefore, market volatility and further deflation of high multiple stocks could impact AMD's stock price. Moreover, Intel could bounce back, and the company could begin taking back some of its lost market share. In such a scenario, we could see AMD's share of the CPU market decline along with the company's share price. AMD remains an elevated risk/reward investment and may not be suitable for conservative investors.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9003300778,"gmtCreate":1640869059332,"gmtModify":1676533549262,"author":{"id":"3577781617271173","authorId":"3577781617271173","name":"Meshaarias72","avatar":"https://static.tigerbbs.com/c5282cda6a9d3948fc067b21adcb578c","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3577781617271173","authorIdStr":"3577781617271173"},"htmlText":"I like AMD but still don’t take stop forwards [Grin]&nbsp;","listText":"I like AMD but still don’t take stop forwards [Grin]&nbsp;","text":"I like AMD but still don’t take stop forwards [Grin]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9003300778","repostId":1187913769,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":692374437,"gmtCreate":1640864024931,"gmtModify":1676532500343,"author":{"id":"3578200234343382","authorId":"3578200234343382","name":"AnT","avatar":"https://static.tigerbbs.com/a777c54118c03953e7be94b2700b9768","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":2,"crmLevelSwitch":1,"idStr":"3578200234343382","authorIdStr":"3578200234343382"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/692374437","repostId":1187913769,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":7140701,"gmtCreate":1640864030453,"gmtModify":1663239330251,"authorId":3578200234343382,"author":{"id":3578200234343382,"idStr":"3578200234343382","authorId":3578200234343382,"name":"AnT","avatar":"https://static.tigerbbs.com/a777c54118c03953e7be94b2700b9768","vip":1,"crmLevel":2,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":692374437,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"}],"langContent":"CN"},{"id":692344288,"gmtCreate":1640861197844,"gmtModify":1676532500008,"author":{"id":"3564048100321619","authorId":"3564048100321619","name":"TraderHan","avatar":"https://community-static.tradeup.com/news/6d4018de520ac700e8f21eafd1b5e8fa","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3564048100321619","authorIdStr":"3564048100321619"},"htmlText":"Winn","listText":"Winn","text":"Winn","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/692344288","repostId":1187913769,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":9003928090,"gmtCreate":1640856224551,"gmtModify":1676533548238,"author":{"id":"3585641098078250","authorId":"3585641098078250","name":"davidmingwei","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3585641098078250","authorIdStr":"3585641098078250"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9003928090","repostId":1187913769,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":692328272,"gmtCreate":1640855304434,"gmtModify":1676532499353,"author":{"id":"3581502897038686","authorId":"3581502897038686","name":"Grit100","avatar":"https://static.tigerbbs.com/c3c65cb20cfcce91cc07fddb27bc3ccd","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581502897038686","authorIdStr":"3581502897038686"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/692328272","repostId":1187913769,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":7140317,"gmtCreate":1640855318176,"gmtModify":1640855318176,"authorId":3581502897038686,"author":{"id":3581502897038686,"idStr":"3581502897038686","authorId":3581502897038686,"name":"Grit100","avatar":"https://static.tigerbbs.com/c3c65cb20cfcce91cc07fddb27bc3ccd","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":692328272,"type":1,"supId":0,"prevId":0,"content":".","text":".","html":"."}],"langContent":"CN"},{"id":9003920668,"gmtCreate":1640855296944,"gmtModify":1676533548154,"author":{"id":"3574044380631135","authorId":"3574044380631135","name":"Alkid","avatar":"https://static.tigerbbs.com/d584ca72b32575d58fab92034b2973bc","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3574044380631135","authorIdStr":"3574044380631135"},"htmlText":"Okay","listText":"Okay","text":"Okay","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9003920668","repostId":1187913769,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":52,"commentSize":10,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 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