Shares of Advanced Micro Devices (AMD) rallied in the past six months. The share price soared by more than an astonishing 90%, knocking the overall market sideways.

This stock will likely continue to post impressive share price performance, despite industrial supply chains headwinds. The company is seen to strengthen its position further in each growing market. Thus, I am bullish on this stock. (See Analysts’ Top Stocks on TipRanks)

Based in Santa Clara, California, this chipmaker is providing its technologies on a global scale and serves various markets.

The company offers micro and embedded processors and motherboard chipsets, in addition to a broad range of graphics processors. Its customers range from manufacturers of personal computers to embedded system applications, including providers of servers, data centers and workstations located around the world.

Several customers are leading members of the Fortune 500.

Q3 Earnings

In the third quarter of 2021, the company reported a strong increase in the shipment of third generation Epyc processors to the data centers. Thus, total revenues and the operating income hit another quarterly record.

Year-over-year, total revenues jumped 54% to $4.31 billion, beating projections by $200 million, while the operating income rose by 111% to $948 million.

The Computing and Graphics segment made up 56% of total revenue, growing 44% year over year, while the Enterprise, Embedded and Semi-Custom segment accounted for the remaining 44%, growing 69%
year-over-year.

Furthermore, the gross margin rose 440 basis points higher, to 48%.

The adjusted EPS increased 78% to $0.73, beating the average consensus by $0.07.

A Growing, Expanding Business

This technology stock is well-positioned across all growing markets. The following wins are worth mentioning.

Facebook’s (FB) decision to empower many of its data centers with Epyc processors automatically puts Advanced Micro Devices in a wonderful position. AMD will benefit from the plan of the world’s most widely used social media platform to allocate massively to its Metaverse strategy.

For this purpose, Advanced Micro Devices is equipping its Epyc processor with additional memory. Also, Microsoft (MSFT) will use this new version of AMD’s chips in an offering associated with its software giant’s Azure cloud service.

Before the end of the year, Advanced Micro Devices should complete the annexation of programmable logic chipmaker Xilinx (XLNX) for a total consideration of about $35 billion. Following this, from a supply side, Advanced Micro Devices is on track to serve more than 50% of the data center market in less than two years, many analysts currently think, reinforcing the position of this fierce chipmaker competitor.

Furthermore, the coordinated effort of the U.S. and six non-OPEC countries to reduce energy costs through the release of strategic oil reserves will widen the portion of disposable income that consumers can spend on computers, tablets, mobile phones and several other devices.

The demand for microchips will also be increasingly strong thanks to the electrification of activities that the ecological transition implies, since the world has targeted sustainability. If the U.S. Senate also approves President Joe Biden’s $1.75 trillion maxi plan on welfare, education and climate, this could create an extraordinary growth opportunity for the microprocessor market.

Looking Ahead to Q4 and Full-Year Fiscal 2021

For the final quarter of 2021, the company projects a revenue of approximately $4.5 billion versus the average consensus of $4.52 billion, and it expects an adjusted gross margin of 49.5%.

For the entire year of 2021, the company guides for a total revenue of $16.1 billion versus analysts’ average projection of $16.13 billion.

The adjusted gross margin is expected to hover at 48%.

We will see a 40% year-over-year increase in fourth-quarter revenue and a 65% year-over-year increase in full-year revenue, assuming that the company will be correct with its projections.

Wall Street’s Take

In the past three months, twenty-two Wall Street analysts have issued a 12-month price target for AMD.

The average Advanced Micro Devices price target is $141.80, implying 8.2% downside potential. The company has a Moderate Buy consensus rating, based on 14 Buys and eight Holds assigned.

Summary

The stock is poised to benefit from all growing markets. Thus, contrary to the analysts’ average target price estimate, I believe the share price will continue to rise.

Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source: Nasdaq

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