AMD Is Dead Money (Rating Downgrade)

seekingalpha2024-01-31

【Editor’s Note: This article is posted before AMD’s Q4 Earnings】Going into today's Q4 2023 report, AMD stock is wildly overbought and could experience a correction in the absence of superlative ...

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Tigresses
2024-01-31
Tigresses
: This article is posted before AMD’s Q4 Earnings
Guavaxf30
2024-01-31
Guavaxf30
Thanks for this sober article. From the sell-down we are seeing, a couple of hours before the results are released, it seems that quite a few people share the same feelings. Or some may even have advanced info on what the results are even.

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As such, today's Q4'23 report could be a \"sell the news\" event!","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4504":"桥水持仓","SH":"标普500反向ETF","IVV":"标普500指数ETF","AMD":"美国超微公司","BK4548":"巴美列捷福持仓","LU0689472784.USD":"安联收益及增长基金Cl AM AT Acc","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","GFS":"GLOBALFOUNDRIES Inc.","BK4554":"元宇宙及AR概念","SPY":"标普500ETF","BK4515":"5G概念","BK4532":"文艺复兴科技持仓","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","NVDA":"英伟达","SSO":"两倍做多标普500ETF","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU1316542783.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD","BK4567":"ESG概念","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","SPXU":"三倍做空标普500ETF","BK4566":"资本集团","LU2458330243.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A-H1\" (SGDHDG) ACC","BK4587":"ChatGPT概念","UPRO":"三倍做多标普500ETF","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","BK4535":"淡马锡持仓","SDS":"两倍做空标普500ETF","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","OEX":"标普100","BK4543":"AI","LU1242518931.SGD":"Fullerton Lux Funds - Asia Absolute Alpha A Acc SGD","OEF":"标普100指数ETF-iShares",".SPX":"S&P 500 Index","BK4588":"碎股","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","INTC":"英特尔","BK4141":"半导体产品","LU0080751232.USD":"富达环球多元动力基金A","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0321505439.SGD":"Schroder ISF Global Dividend Maximiser A Acc SGD","SMCI":"超微电脑","LU0109392836.USD":"富兰克林科技股A","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC"},"translate_title":"AMD是死钱（评级下调）","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMD":1,"SPY":1,"SMCI":1,"INTC":1,"NVDA":1,"GFS":1,"UPRO":0.6,"OEF":0.6,"OEX":0.6,"SDS":0.6,"SH":0.6,"SPXU":0.6,"SSO":0.6,".SPX":0.6,"ESmain":0.6,"IVV":0.6},"content_text":"【Editor’s Note: This article is posted before AMD’s Q4 Earnings】Going into today's Q4 2023 report, AMD stock is wildly overbought and could experience a correction in the absence of superlative forward guidance from management.While the stock has run up vertically in recent weeks, revenue and earnings estimates for Q4 have moved lower. That said, 2024 is expected to be a different story.Despite AMD's significant AI potential, its stock is priced for perfection (and more). At $177 per share, AMD's long-term risk/reward is unattractive.With AMD looking like dead money for the next five years, I'm downgrading it to a \"Sell\" ahead of its Q4 2023 report.Jerod HarrisIntroductionAhead of its quarterly report, Advanced Micro Devices (NASDAQ:AMD) stock has run up to new all-time highs in a stunning vertical move. From a technical perspective, AMD is massively overbought (RSI > 70) and looks primed for a correction. As such, today's Q4'23 report could be a \"sell the news\" event!AMD stock chart (WeBull Desktop)In my previous update on the semiconductor giant, I downgraded AMD stock to a \"Hold\" due to unfavorable risk/reward:In my mind, AMD is a show-me story after such a mixed bag of an earnings report. While I continue to believe in Lisa Su and her leadership team, we need more evidence that AMD can wrestle a sizable market share from Nvidia in the AI GPU market, and defend its territory in the CPU market against rivals (primarily, Intel (INTC) and Nvidia).For now, I'm moving to the sidelines on AMD (pausing accumulation); however, if the risk/reward were to improve significantly via a price decline, we would happily add more shares to our long position.Key Takeaway: I rate AMD a \"Hold\" at $98 per shareSource: AMD Q3 Mixed Report, Soft Guidance: I'm Staying The Course But Won't Add More (Downgrade)While I recommended staying the course with AMD stock, the rating downgrade was clearly an ill timed move given AMD's stock has jumped up by ~80% since that call. As an analyst, I strive to get things right at all times, but this one I seem to have gotten horribly wrong.In this note, we will preview AMD's Q4 2023 report and discuss its long-term risk/reward in light of this vertical run-up in the stock.Earnings Expectations For Q4 Have Gone In The Wrong Direction, But 2024 Promises To Be A Different StoryIn recent weeks, AMD has received lots of love from AI-hungry investors. And, while I have expressed bullishness on AMD's AI prospects in multiple research reports in the past, AMD's financials have failed to show any AI uptick thus far. For Q4 2023, AMD guided for revenues of $6.1B (+/- $300M) (slightly below street estimates.)AMD Investor RelationsSeekingAlphaAnd going into today's earnings print, consensus street estimates are pegging AMD's Q4 revenue to come in at $6.14B, i.e., in line with management's guidance and well within the stated range.Despite the irresistible rally in AMD stock, consensus estimates for Revenue and EPS have been moving lower over the last three months, with 30 and 33 downward revisions for Revenue and EPS, respectively.SeekingAlphaGiven Intel's disappointing Q4 results and weak guidance, I'm not optimistic about the idea of a significant beat from AMD in Q4. However, considering the run up in AMD's stock, I think forward guidance holds the key here.As you may know, AMD's much-awaited MI-300 AI GPU accelerators are coming to market only in the first half of 2024, and according to industry sources, the semiconductor giant is expected to ship 400K units in 2024.Now, as per management's guidance, AMD's AI chip revenues are set to reach $2B this year. And considering Lisa Su & Co's guidance history, this estimate could be heavily sandbagged.With PC markets seeing a sharp recovery, AMD's business is projected to re-accelerate growth throughout 2024 as it continues to take market share from Intel. And according to consensus estimates, AMD's EPS is set to grow much faster than revenue!SeekingAlphaSeekingAlphaAMD has massive AI potential, which is not reflected in its financial numbers just yet like with - Nvidia (NVDA) or Super Micro (SMCI). However, this is likely to change in 2024, as MI-300 accelerators come to market in the next few months. While AMD's Q4 report is unlikely to support the stock rally, investors are probably looking beyond this quarter and into 2024.Final Thoughts: Despite AMD's AI Potential, It's Long-Term Risk/Reward Is UnattractiveIn light of Nvidia's blowout Q2 report (and high demand for AI chips), I upgraded AMD's five-year CAGR sales growth expectations from 15% to 25% in our model during the summer of 2023. While AMD is still not showing that AI bump in sales growth, AMD's data center business is all set to return to rapid growth in upcoming quarters, with demand for AI GPUs set to drive revenues higher (MI300 - AI GPUs guided to deliver $2B revenue in 2024). With $1T worth of cloud & data center infrastructure set to be replaced over the next 10 years, AMD has a long runway for growth. That said, in order to implement a margin of safety, I'm utilizing a five-year growth assumption of 20%, which is where consensus street estimates are sitting right now.SeekingAlphaHere's my updated valuation model for AMD:TQI Valuation Model Free to use at TQIG.orgAs you can see above, AMD's fair value is ~$110 per share, which implies a downside of roughly 38% from current levels. Assuming a base case P/FCF exit multiple of ~20x, we get to a 5-year price target of ~$190 per share, which implies a CAGR return of ~1.4%.TQI Valuation Model (Free to use at TQIG.org)At current levels, AMD stock looks like dead money for the next five years. With AMD's base case expected CAGR falling well short of my investment hurdle rate and long-term market (SPY) returns (of 8%-10% per year), I rate AMD stock a \"Sell\" at $177 per share.I understand that making this \"sell\" call on AMD stock right before its earnings report is a risky move (especially with animal spirits running wild in the stock market). However, the incredible rally in AMD's stock price has rendered the stock dead money for the next five years according to TQI's Valuation Model. Please note, this is not a \"Short Sell\" recommendation.Until and unless AMD delivers superlative guidance for 2024 (and beyond), I see a deep corrective pullback in AMD stock from massively \"overbought\" levels in the near-to-medium term, with today's Q4 report being a likely trigger for such a downturn.Key Takeaway: I rate AMD a \"Sell\" at $177 per share.","kind":"highlight","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":0},"commentList":[{"id":268802953916472,"gmtCreate":1706660235263,"gmtModify":1706664365895,"author":{"id":"4119162472697902","authorId":"4119162472697902","name":"Tigresses","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":8,"crmLevelSwitch":0,"authorIdStr":"4119162472697902","idStr":"4119162472697902"},"htmlText":": This article is posted before AMD’s Q4 Earnings","listText":": This article is posted before AMD’s Q4 Earnings","text":": This article is posted before AMD’s Q4 Earnings","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/268802953916472","repostId":2407236048,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":268737106112600,"gmtCreate":1706644327200,"gmtModify":1706644332447,"author":{"id":"3576140222331577","authorId":"3576140222331577","name":"Guavaxf30","avatar":"https://static.tigerbbs.com/1ff15ff6aa254c9130f9af922f7e2447","vip":1,"crmLevel":9,"crmLevelSwitch":1,"authorIdStr":"3576140222331577","idStr":"3576140222331577"},"htmlText":"Thanks for this sober article.&nbsp; From the sell-down we are seeing, a couple of hours before the results are released, it seems that quite a few people share the same feelings.&nbsp; Or some may even have advanced info on what the results are even.&nbsp;","listText":"Thanks for this sober article.&nbsp; From the sell-down we are seeing, a couple of hours before the results are released, it seems that quite a few people share the same feelings.&nbsp; Or some may even have advanced info on what the results are even.&nbsp;","text":"Thanks for this sober article. From the sell-down we are seeing, a couple of hours before the results are released, it seems that quite a few people share the same feelings. Or some may even have advanced info on what the results are even.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/268737106112600","repostId":2407236048,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":8,"commentSize":2,"repostSize":2,"favoriteSize":0,"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":"4.29.4","shortVersion":"4.29.4","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/2407236048"}