By Senad Karaahmetovic
Advanced Micro Devices Inc (NASDAQ:AMD) yesterday unveiled its “strong and compelling” long-term financial model during the Investor Day event.
The chipmaker expects revenue growth of roughly 20% compound annual growth rate (CAGR), including the latest merger deal with semiconductor company Xilinx.
The chipmaker expects a gross margin of more than 57%, driven by a mix of new offerings, while operating expenses are anticipated to be around 23-24%.
AMD expects an operating margin to hover around mid-30% as the chipmaker improves margins and profitability, with the FCF margin expected at over 25%, indicating the company’s strong cash flow generation capabilities.
Here is how Wall Street analysts saw yesterday’s Investor Day.
Susquehanna’s Christopher Rolland: “We view the new targets as generally expected, but new product updates constructive.”
BofA’s Vivek Arya: “Key takeaways: (1) larger $300bn TAM (vs. $135bn prior when Xilinx closed) suggests AMD is just about 7% represented despite illustrating product outperformance/roadmap consistency; (2) AMD confident on 20% topline pf-growth, supported by $10bn in revenue synergies with Xilinx and share gains in core markets; (3) AMD more focused on creating optimized (ie Bergamo for cloud) and customized (with customer “special sauce” aka IP blocks) as workloads diversify; (4) next gen 5nm Genoa server CPU on track for Q4 ramp (now almost simultaneous with Intel next gen I7 nm Sapphire Rapids given delays); and (5) in the near-term, AMD reiterated 2022 outlook (of 60%+ growth), encouraging after Intel (NASDAQ:INTC) warned at our Global Tech Conference earlier this week.”
JPMorgan’s Harlan Sur: “It was clear to us that the team’s solid execution of its technology/product roadmaps over the past several years has set the company up to maintain a 2-step lead over its competitors, in our view, and AMD is currently seeing solid share gains, strong revenue growth, and a higher profitability profile as a result.”
Goldman Sachs’ Toshiya Hari: “We come away from the event with higher conviction in AMD’s market share prospects as well as its ability to drive revenue synergies associated with the Xilinx and Pensando acquisitions... We reiterate our Buy rating on the stock based on a 12-month price target of $133 (35% potential upside). AMD is not immune to macro volatility; however, we believe there are enough positive offsets for the company to sustain its fundamental outperformance.”
Raymond James’ Chris Caso: “Our overriding thesis on AMD however is that INTC’s 80%+ market share is simply unsustainable even if INTC does manage to catch up, since we see no possible scenario in which INTC has a meaningful performance advantage through 2025, and it’s quite possible that INTC misexecutes on their aggressive roadmap. With AMD stock now trading at ~16x that $6 2024 earnings power, we think that’s a highly attractive multiple for a company with prospects of 20% top line growth.”