Advanced Micro Devices (AMD)

Advanced Micro Devices (AMD)

Is AMD stock a good buy?

In this article, we review AMD stock to determine if it’s a good buy, sell, or hold.

Table of Contents

Advanced Micro Devices is a global semiconductor company founded in 1969 and based in Santa Clara, CA. Their office locations include the US, Canada, Armenia, Brussels, Dubai, Ireland, Scotland, France, Turkey, Russia, Argentina, Mexico, Brazil, China, India, Malaysia, South Korea, Singapore, Australia, and Japan.

If you’re an investor who wants to invest in businesses only in your country, you will limit your earning potential because of manufacturing and supply chain limitations. AMD on the other hand is a perfect example of a hardware company with office locations, manufacturing plants, and supply chain systems that cover the entire globe. This provides the opportunity to scale revenue and net income which will translate to a share price that can continuously increase. 

Tykr Rating

  • Summary: Watch
  • Score: 17/20
  • MOS: 39%
  • Share Price: $101
  • Sticker Price: $166

AMD Company History

  • They created their first RAM chip in 1971.
  • They went public in 1972.
  • They entered a joint venture with Siemens in 1977 to create Advanced Micro Computers but this division never took off and was eventually closed in 1981 so AMD could place its focus on microprocessors.
  • In 1978, annual revenue surpassed $100M.
  • In 1981 Intel and AMD entered into a 10-year technology exchange agreement where AMD supplied the x86 processor to Intel.
  • In 1984, AMD was listed in the book The 100 Best Companies to Work for in America.
  • In 1985, they made the Fortune 500 list for the first time.
  • By 1985 the microchip market experienced a severe downturn partially due to a stagnant and non-innovative chip market in the US. AMD survived this downturn by focusing on new bipolar chips.
  • AMD survived the dot com bubble because of its flash memory business.
  • In 2003, AMD spun off its flash memory business into Spansion, a joint venture with Fujitsu, which had been co-manufacturing flash memory with AMD since 1993.
  • In 2005, AMD divested itself os Spansion in order to focus on microprocessors and Spansion went public that same year.
  • AMD has acquired several businesses through the years including ATI Technologies in 2006, SeaMicro in 2012, and Xilinx in 2022.
  • AMD’s CEO, Lisa Su, was named executive of the year by EE Times in 2014 and one of the World’s Greatest Leaders by Fortune in 2017. 

AMD Business Model

What is a semiconductor? In simple terms, a semiconductor controls and manages the flow of electrical current in electronic equipment and devices. 

AMD manufactures microprocessors, motherboard chipsets, embedded processors, graphics processors for servers, workstations, personal computers, and embedded system applications.

Semiconductors are used in computers, smartphones, refrigerators, microwaves, washing machines, air conditioners, banking, security, healthcare, automobiles, and manufacturing equipment. 

AMD’s customers include Apple, Salesforce, Tesla, Amazon, Google, Alibaba, Hewlett-Packard, Microsoft, Sony, Mercedes, Sonos, Cinesite, Cloudflare, Dropbox, Hetzner, University of Notre Dame, Brinks, Rimac, CGG, AirShaper, Supership, Molecular Modelling Laboratory, Advantech Sky, and more.

AMD News

This article from fool.com states two semiconductor companies investors should look at buying right now while the market is down including MKS Instruments and AMD. The main reasons why AMD is a top pick because of its customers including Microsoft, Sony, Amazon, Google, Alibaba, and Tesla. It’s also important to note the acquisition of Xilinx will help AMD increase its market share in the competitive semiconductor market.

This article from investorplace.com states that AMD will use its third-generation EPYC processors in partnership with Google Cloud. This partnership will likely generate considerable cash flow and keep driving the AMD share price higher.

This article and video from fool.com states that although there are semiconductor supply chain shortages around the globe, AMD will still continue to thrive over the coming years. In fact, when there is a shortage, this means semiconductor companies have pricing power or in other words, they can charge more for each chip. This results in higher profit margins.

This article from thedogofwallstreet.com lists 3 tech stocks that will take off when the market starts to rally. Those stocks include AMD, FB, and SNOW. AMD is very much oversold and will rally when the market turns around. Now is the time to buy.

AMD Competition

NVIDIA (NVDA)

  • Score:  15/20
  • MOS:  1%
  • Share Price: $186
  • Sticker Price:  $188
  • Summary:  Watch
  • Revenue: $26.9B

Intel (INTC)

  • Score:  10/20
  • MOS:  1%
  • Share Price: $44
  • Sticker Price: $44
  • Summary:  Watch
  • Revenue: $79B

Marvell Technology (MRVL)

  • Score:  10/20
  • MOS:  1%
  • Share Price: $59
  • Sticker Price: $59
  • Summary:  Watch
  • Revenue: $4.9B

MKS Instruments (MKSI)

  • Score:  16/20
  • MOS:  48%
  • Share Price: $123
  • Sticker Price: $237
  • Summary:  Watch
  • Revenue: $2.9B

Taiwan Semiconductor Manufacturing Company (TSM)

  • Score:  16/20
  • MOS:  1%
  • Share Price: $95
  • Sticker Price: $96
  • Summary:  Watch
  • Revenue: $362 (TWD)

AMD 4M’s

Now let’s take a look at the 4 M’s. A wise investor should always look past the numbers and look at the business.

MOS: With a score of 17/20, this shows the financials are very strong and with a MOS of 39%, this shows there is still some upside potential with the stock. Although we like to see a MOS of 50% or more, the 39% is still pretty good.

Meaning: It’s clear to see the semiconductors are not going away. They are an essential component of most electronics. Regarding AMD, they have an impressive list of customers and as long as AMD’s chips keep meeting and exceeding expectations, AMD will continue to scale revenue, profits, and its share price.

Moat: There are a lot of competitors in this space. Fortunately, with the high demand and low supply of semiconductor chips, the top competitors including NVDA should see continued growth.

Management: Lisa Su has served as CEO since 2014. She earned a bachelor’s degree, master’s degree, and Ph.D. from MIT. From 1994 to 1995 she worked at Texas Instruments. From 1995 to 2007 she worked at IBM. From 2007 to 2011 she served as CTO at Freescale Semiconductor. In 2012 she joined AMD as Senior Vice President and General Manager at AMD. In those first years she played a prominent role in pushing AMD beyond PC and into video game consoles such as Microsoft Xbox and Sony Playstation. With here background, she is a perfect fit for CEO. 

AMD Financials

Now let’s take a look at the financials. A wise investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.

Revenue (Found on the Income Statement)

  • 2018: $6.4B
  • 2019: $6.7B
  • 2020: $9.7B
  • 2021: $16.4B 
  • Revenues have consistently increased.

Net Income (Found on the Income Statement)

  • 2018: $337M
  • 2019: $341M
  • 2020: $2.4B
  • 2021: $3.1B
  • Net income made a nice jump in 2020 and has continued to increase since.

EPS (Found on the Income Statement)

  • 2018: .34
  • 2019: .31
  • 2020: 2.10
  • 2021: 2.67
  • EPS also increase in 2020 and continued to increase in 2021.

Free Cash Flow (Found on the Cash Flow Statement)

  • 2018: -$129M
  • 2019: $276M
  • 2020: $777M
  • 2021: $3.2B
  • Free Cash Flow substantially increased in 2021 which is a great sign.

Total Assets (Found on the Balance Sheet)

  • 2018: $4.5B
  • 2019: $6B
  • 2020: $8.9B
  • 2021: $12.4B
  • Total Assets have consistently increased.

Total Liabilities (Found on the Balance Sheet)

  • 2018 = $3.2B
  • 2019 = $3.2B
  • 2020 = $3.1B
  • 2021 = $4.9B
  • Total Liabilities have remained somewhat flat which is a good sign.

Total Debt (Found on the Balance Sheet)

  • 2018 = $1.2B
  • 2019 = $529M
  • 2020 = $531M
  • 2021 = $661M
  • Total debt decreased from 2018 to 2019 which is a great sign but it leveled off since. We want to see this number decrease in 2022.

Total Equity (Found on the Balance Sheet)

  • 2018 = $1.2B
  • 2019 = $2.8B
  • 2020 = $5.8B
  • 2021 = $7.4B
  • Total Equity has continuously increased which is a great sign.

Is AMD stock a good buy?

As of 6/1/2022, the share price is down 37% from its all-time high. This is one of the best AMD buying positions we’ve seen in years. Although the stock is classified as Watch, it still has a MOS of 39% which shows some upside potential. All 4M’s check out and when this market corrects and starts to rally, AMD will take off. If you’re interested in semiconductor stocks, put AMD at the top of your list.

The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.

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