Is AMD a buy near the highs?

It’s time to breakdown one of the leading semiconductor names within the market. Here is the breakdown of $AMD, otherwise known as Advanced Micro Devices.


Current Price: $92.67

52/Wk High: $96.37

52/Wk Low: $36.75


Market Cap: $113.1 billion


Read below for the breakdown!


Advanced Micro Devices is a major global semiconductor company that offers various components such as APUs and CPUs.


Advanced Micro Devices operates in several core segments, the company’s Computing & Graphics segment, as well as the company’s Enterprise, Embedded, and Semi-custom segment.


Breaking $AMD down based on price according to TREFIS (@trefis) research 69.9% of Advanced Micro Devices stock is based on their Computing and Graphics segment.


Furthermore, 28.9% of the stock price is based on Advanced Micro Devices Enterprise, Embedded, and Semi-Custom segment.


In recent news, $AMD has announced and is acquiring Xilinx, the leading provider of adaptive computing solutions.


The Xilinx acquisition deal will be an all-stock $35 billion transaction and will increase Advanced Micro Devices TAM (Total Addressable Market) to $110 billion.


In total AMD’s acquisition of Xilinx maintains an estimated enterprise value of $135 billion and according to management “brings together two industry leaders with complementary product portfolios and customers” the company noted.


Shifting into the numbers, $AMD reported a third-quarter beat. Advanced Micro Devices beat Q3 EPS estimates of $0.36 with an EPS of $0.41.


Not only that but $AMD saw record revenues in Q3, reporting $2.801 billion in revenue throughout Q3. Management was also excited to report that operating income totaled $449 million (up 141%) and net income totaled $390 million (up 225%) in Q3 (GAAP Basis).


In short, Q3 revenues increased 56% year over year, gross profit increased by 58% to $1.230 billion, and gross margin increased to 44%.


Digging deeper into the numbers the Computing and Graphics segment saw $1.67 billion (Up 31%) in revenues while the Enterprise, Embedded, and Semi-custom segment recorded $1.13 billion (up 116%) in revenues throughout Q3.


When it comes to Q4 guidance management is expecting $3.0 billion in revenues, representing a 41% year over year increase. Management also expects non-GAAP gross margin to be exactly 45% in Q4.


On a yearly basis, management now expects 2020 revenues to grow by 41%, which is an increase from the original guidance of 32%. AMD also expects 2020 non-GAAP gross margin to be 45%.


Taking a look at the balance sheet the numbers are solid.


Total Debt: $373 million


Total Liabilities: $3.156 billion


Total Assets: $7.023 billion


Cash & Short Term Inv: $1.771 billion


On the flip side, the valuation has seen a significant increase.


Price to Earnings: 131.20x


Price to Sales: 13.08x


Price to Book: 29.23x


Price to Cash Flow: 59.87x


Management has also kept a solid record in recent years.


Return on Equity: 28.66%


Return on Assets: 14.08%


Return on Invested Capital: 21.61%


Given the numbers, the analysts remain mixed on $AMD with a mean price target of $90.41/share, representing a -3.89% loss.


Analysts also maintain a high price target of $120.00/share, representing a 27.56% gain, while the low price target is $13.00/share, representing a -86.18% loss.


The big money is quite involved as well, with 72.21% of Advanced Micro Devices being owned by institutions. Top holders include The Vanguard Group, T. Rowe Price Associates, and BlackRock Institutional Trust.


On a technical basis, $AMD looks to be on the brink of a breakout to roughly a $100/share price point. According to the six-month charts the MACD recently crossed back over to the upside and is now within a tight range around 7.43.


The six-month charts are also implying an RSI of 68.02 and CCI of 224.14, both of which are on the higher end. It is important to note that $AMD trades roughly two points off its highs.


In short, I like $AMD both in the short term and long term. In the short term, $AMD presents a possible breakout to the $100/share level.


In the long term, $AMD will continue to grow, benefit from technological and digital trends, and the Xilinx acquisition will give the company a boost.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research. Luke Donay is long $AMD options.