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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.


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

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