00:00:00
yesterday during trading hours Advanced
00:00:02
Micro Devices was up nearly 5% however
00:00:06
they have reported earnings after the
00:00:08
market close and in the pre-market now
00:00:10
they are down nearly 10% making the name
00:00:13
Advanced money Destroyer perhaps a bit
00:00:16
more accurate now they are down quite
00:00:18
significantly 31% over the last year and
00:00:21
when the market does open they will be
00:00:23
trading at a new 52e low yet we can see
00:00:27
both Wall Street and SEI Alpha still
00:00:30
consider this company to be a buy So
00:00:32
today we're going to run through the
00:00:33
earnings understand what are the issues
00:00:35
what did the market not like what did
00:00:37
the actual numbers show us as well as
00:00:39
running into essentially their investor
00:00:42
presentation getting through to the
00:00:43
numbers and ultimately ending on our own
00:00:46
updated valuation so let's take a look
00:00:48
firstly the headline reads that they did
00:00:50
report a profit beat however they missed
00:00:53
on the data center revenue and remember
00:00:55
at one of the conferences last year the
00:00:57
CEO Lisa Sue did say that she believes
00:01:00
data center as a whole is going to grow
00:01:02
rapidly at 60% on a companded annual
00:01:05
growth rate touching around 500 billion
00:01:08
market share in 2028 so it does look
00:01:10
like analysts weren't happy with what
00:01:12
was reported so let's look at the
00:01:14
numbers now earnings per share Pretty
00:01:16
much telling us they came in line around
00:01:18
the $19 Mark Revenue did also come on
00:01:22
top which was a nice sign and they also
00:01:24
said they expect around 7.1 billion in
00:01:26
sales in the next quarter with gross
00:01:28
margin to hit around 54% now that is
00:01:31
good because ultimately analyst expected
00:01:33
around 7 billion so they've actually
00:01:35
guided higher so we see earnings per
00:01:37
share pretty much coming in in line
00:01:39
revenue a marginal beat and AMD
00:01:42
projecting next quarter to come in
00:01:43
slightly higher than what the market had
00:01:45
forecasted now a few things that maybe
00:01:48
didn't look as good they did report 482
00:01:51
million on their bottom line net income
00:01:53
however we can see this is down from
00:01:55
around
00:01:56
667 million from the same quarter last
00:01:58
year and the COO mentioned that she
00:02:00
believes 2025 will be the year of double
00:02:03
digigit increases to both revenue and
00:02:05
EPS which is ultimately a very positive
00:02:07
sign however and as clearly stated here
00:02:10
one of the most important parts of this
00:02:12
company is the data center which the co
00:02:15
had promised will continue to increase
00:02:17
whilst they do try and gain on that
00:02:18
market share that is something analyst
00:02:21
will be closely looking at and we can
00:02:22
see whilst they did in fact report 3.86
00:02:25
billion which was 69% up from the same
00:02:28
quarter last year this ultimately came
00:02:30
in and quite some way lower than the
00:02:32
analyst expectation of 4.14 billion so
00:02:36
what we have here is AMD looking good on
00:02:38
earnings per share looking good on the
00:02:40
revenue also looking good in terms of
00:02:42
their guidance for the next quarter but
00:02:44
this quarter the market did not like the
00:02:47
fact that data centered missed their
00:02:48
expectations as well as the bottom line
00:02:50
net income lower than the same quarter
00:02:52
last year however from a 4-year
00:02:54
perspective the data center is up nearly
00:02:57
100% to 12.6 billion but no surprise
00:03:00
here in the GPU Market they do like the
00:03:02
leader Nvidia which as we will come to
00:03:05
show you is one of the reasons why over
00:03:07
the last few weeks and last few months
00:03:09
we did get a flurry of downgrades from
00:03:11
analysts as we can see as well the final
00:03:14
comment here is that the CEO says they
00:03:16
believe that places AMD on a steep
00:03:18
long-term growth trajectory led by
00:03:20
rapidly scaling their data center AI
00:03:22
franchise so now let's look at the
00:03:24
revised expectations over the next four
00:03:26
quarters so ultimately 2025 they do
00:03:29
anticipate still strong double digigit
00:03:31
EPS growth as in fact the co said on the
00:03:34
call yesterday and over the last four
00:03:36
quarters at a bare minimum they have
00:03:38
been in line which is a good sign
00:03:40
meaning right now for the full year of
00:03:42
2025 their forward P sits at 25.5 one
00:03:46
and as we will come to show you now that
00:03:47
is pretty much in line with the sector
00:03:50
comparative so you need to ask
00:03:51
yourselves is this a company that is
00:03:53
trading in line with the sector that
00:03:55
actually in comparison to other metrics
00:03:57
they perform a lot better so they're
00:03:58
trading at a discount or in fact they're
00:04:01
trading in line on valuation with the
00:04:03
sector but other metrics worse off and
00:04:06
in fact should be trading at a discount
00:04:08
we're going to cover that as we said in
00:04:09
our valuation model and we also want to
00:04:11
pinpoint here in comparison to the 5year
00:04:14
average right now at 25 on a forward P
00:04:17
basis AMD is trading significantly lower
00:04:20
so now let's jump into the investor
00:04:22
presentation lots of useful information
00:04:24
their revenue then in this quarter in
00:04:26
comparison to last year is up around 24%
00:04:29
no surprises though the main driver of
00:04:32
this is the growth in data center which
00:04:34
we can look at in a little bit more
00:04:35
detail gross margin again something that
00:04:38
we quite like to closely monitor is up
00:04:40
as well this shows us efficiency not
00:04:42
only Revenue growth but we do want to
00:04:43
see that on the margins operating income
00:04:46
also moving in the right direction as we
00:04:48
can see for both Gap and non- GAP and
00:04:50
then we move on to the earnings per
00:04:52
share now we do notice the Gap has
00:04:54
actually decreased and this as we can
00:04:56
see does come down to the fact that
00:04:57
there was a one-time tax provision
00:04:59
because when we look at it on a non-gaap
00:05:01
basis we do see it tick up in the
00:05:03
upwards trajectory then when we take a
00:05:05
look at the p&l for this latest quarter
00:05:08
Revenue year on year as we mentioned up
00:05:10
24% on a quarter by quarter still double
00:05:13
digit 12% their margins very important
00:05:16
to note here it is Up 3 percentage
00:05:18
points from the same quarter last year
00:05:20
and their operating margin also Up 3
00:05:22
percentage points bottom line and EPS up
00:05:25
42% so this although we do get to see
00:05:28
decrease in the share price was what we
00:05:30
would consider a fairly strong quarter
00:05:32
for the market they really lagged in
00:05:33
that data center which is driving the
00:05:35
price down because ultimately on a
00:05:37
year-on-year comparative it is up 69%
00:05:40
and also on a quarter by quarter basis
00:05:42
up around 9% although as we mentioned
00:05:44
the market did want to see at least 10%
00:05:47
more in terms of the revenue figure now
00:05:49
for the full year FY 24 revenue is up
00:05:51
around 14% gross margin this is now for
00:05:54
the four-year comparison also up so not
00:05:56
only on the quarter are we seeing
00:05:58
efficiencies on grosset margin but also
00:06:00
on a yearly basis operating margin again
00:06:03
both sides of the spectrum ticking
00:06:05
upwards earnings per share looking very
00:06:07
strong in fact when we take a look their
00:06:09
bottom line is up 26% on a year- on-ear
00:06:13
comparative on non Gap up 92% as we can
00:06:16
see on a gap basis and then we move to
00:06:18
the full year summary so this is FY 24
00:06:21
compared to FY 23 Revenue up 14% gross
00:06:25
margin Up 3 percentage points operating
00:06:27
margin Up 3 percentage points as well
00:06:29
and both bottom line and earnings per
00:06:31
share up 25% so a very strong quarter
00:06:35
finally in terms of the revenue segment
00:06:37
of data centers we can see up 94% and
00:06:40
the operating income up
00:06:42
175% which tells us and one of the
00:06:44
reasons why companies are trying to
00:06:46
focus on the data center element it's
00:06:48
because the margins there are
00:06:50
significantly High making it a lot more
00:06:52
profitable and increasing their bottom
00:06:54
line net income and finally on a
00:06:56
graphical basis for those that want to
00:06:57
see the data center segment up 6 9% on a
00:07:00
year on-year comparative now sitting at
00:07:02
3.9 billion and the operating margin
00:07:05
also up to 30% now remember this is a
00:07:07
company where we did see a flurry of
00:07:09
downgrades in fact Bank of America did
00:07:12
drop this firstly in December due to
00:07:14
potential market share losses they only
00:07:16
reduce it slightly down to
00:07:18
$155 but this really opened the Gateway
00:07:21
for many other companies to also lower
00:07:24
their targets we saw HSBC a few weeks
00:07:27
later with a double downgrade in fact
00:07:29
they say say AMD is worth $100 per share
00:07:32
which right now it actually sits lower
00:07:34
than that price not too long ago we were
00:07:37
saying how it sits above we also then
00:07:39
got another company Goldman Sachs who
00:07:42
also believes that lower data segment in
00:07:44
2025 is going to be expected now we did
00:07:47
get lower in essence of comparison
00:07:49
against the forecast but it is still a
00:07:51
significant increase from the previous
00:07:53
quarter from the previous year as well
00:07:55
and we get to see here a removal of the
00:07:58
$210 price Target that they had only a
00:08:01
few weeks ago also just a few days ago
00:08:03
we got another that is for the weekend
00:08:05
count so far in terms of a downgrade
00:08:07
this is from Mia's research where they
00:08:09
say there is a lot of competition from
00:08:11
Nvidia who do ultimately have a large
00:08:13
portion of the market share and they've
00:08:15
also lowered their price Target they
00:08:17
ultimately say this isn't something that
00:08:20
is in relation to deep seek where we did
00:08:21
get a quite large selloff by all
00:08:24
semiconductors But ultimately Nvidia are
00:08:26
strong any market share to AMD now in
00:08:29
terms of the growth of the company they
00:08:30
do get an A as we can see year-on-year
00:08:32
Revenue growth at around 10% it is above
00:08:35
the sector median but bear in mind 5
00:08:37
years on average this company was up 34%
00:08:40
year on year forward looking again the
00:08:43
same conclusion 11% above the sector at
00:08:45
6% but still lower than their 5year
00:08:47
average but the one key area that really
00:08:49
stands out that we do hope we can see
00:08:51
them execute on is the earnings per
00:08:53
share anticipated up 44% over the next 3
00:08:57
to 5 years above both comparatives at 15
00:09:00
and 33% respectively we also note here
00:09:03
the profitability where they get a B+
00:09:05
gross margin which as we did highlight
00:09:07
has started to increase quarter on
00:09:09
quarter year on year above both
00:09:11
comparatives again at 50 and 48% bottom
00:09:14
line however whilst it is above the
00:09:16
sector comparative does sit quite a way
00:09:18
lower than the 11.4 of their 5year
00:09:21
rolling and cash generated from
00:09:22
operations a fairly similar conclusion
00:09:25
2.12 billion significantly above the 99
00:09:28
million of the sect but only marginally
00:09:30
lower than the comparative of 2.3
00:09:33
billion what we also want to make you
00:09:34
aware of is institutions who have been
00:09:36
buying a lot of this company in 2024
00:09:39
ownership sits at 71% which as we can
00:09:42
see over the last year they were selling
00:09:44
around 11 billion however they have
00:09:46
bought nearly twice as much at 18.4 and
00:09:49
whilst we can see in Q4 a little bit
00:09:51
more selling than buying this is just a
00:09:53
constant theme we have seen with the
00:09:55
institutions but something again we can
00:09:57
bear in mind when we get the next
00:09:58
quarter data But ultimately institutions
00:10:01
have been historically fairly bullish on
00:10:03
AMD now if we take a look at Insider
00:10:05
ownership we can in fact see around 65%
00:10:08
there was some selling over the last
00:10:10
year of 68 million in terms of the first
00:10:12
quarter so pretty much in January this
00:10:14
year no movement however in Q4 we can
00:10:17
see 28 million worth of shares sold now
00:10:20
if we take a look to see who these
00:10:21
insiders are the most recent one was the
00:10:23
CEO herself fourth in fact of December
00:10:26
sold just under 77,000 shares then
00:10:29
getting her $1 million information is
00:10:32
here bear in mind not something we use
00:10:34
ourself given the fact that it isn't
00:10:36
typically a bearish signal they sell for
00:10:38
many reasons personal and financial we
00:10:40
also just want to highlight the
00:10:42
performance of AMD against others in the
00:10:44
sector we have Qualcomm Texas
00:10:46
Instruments arm Holdings as well as some
00:10:48
other popular names over the last year
00:10:50
they're actually not only the worst
00:10:51
performing and this will go down even
00:10:53
further today but also the only one over
00:10:56
the last year with negative performance
00:10:58
if we expand our search to over the last
00:11:00
5 years we can see actually the second
00:11:03
best performing so interesting how we
00:11:05
widen the net they have turned from the
00:11:07
worst performing to the second best and
00:11:09
over the last 10 years massive
00:11:10
outperformance but again bear in mind a
00:11:13
lot can change in just a few years as we
00:11:15
have seen and also past performance
00:11:17
doesn't determine the future now we also
00:11:19
want to show you the comparison against
00:11:21
the S&P because ultimately if we're
00:11:22
picking single stocks we want them to
00:11:24
outform S&P though over the last year no
00:11:27
surprises has out formed but over both
00:11:30
the last five and the last 10 years AMD
00:11:32
has ultimately outperformed question is
00:11:35
can they keep that momentum as just over
00:11:37
the last year they have been struggling
00:11:39
now we also want to run through very
00:11:41
quickly the metrics of this company free
00:11:43
cash flow has been inconsistent over the
00:11:45
last 10 years main reason for this it is
00:11:47
in the semiconductor space where we do
00:11:49
get a lot of sick locality so volatility
00:11:52
is anticipated and that also shines
00:11:54
through in the sales growth however more
00:11:56
often than not they do typically report
00:11:58
double digit incre increases to their
00:12:00
Top Line and we can see the rapid growth
00:12:02
they have seen just over the last 10
00:12:04
years from 4 billion reported in 2015 to
00:12:07
26 in 2024 now also key to understand
00:12:10
they do dilute your position as a
00:12:12
shareholder as we can see over the last
00:12:14
10 years it has been increasing we would
00:12:16
say though if they can continue over the
00:12:18
longer term to outform the S&P then you
00:12:21
probably wouldn't ultimately care royc
00:12:23
we want 10% or more as a bare minimum
00:12:26
but we can see a lot of inconsistency
00:12:28
not something they have hit over the
00:12:30
last 3 years and the same to be said on
00:12:32
the margins not only a lot of
00:12:34
cyclicality which then gives us the
00:12:36
volatility in the numbers but no
00:12:38
consistency throughout the only positive
00:12:40
thing we would say is free cash flow at
00:12:42
least over the last 6 years has been
00:12:44
around the 5% point that we want to see
00:12:46
at a bare minimum now probably our
00:12:48
favorite metric for AMD is the net debt
00:12:50
to ebit DAR from 2019 and expected over
00:12:53
the next 12 months we see Zero now these
00:12:55
are the number of years it would take
00:12:57
the company to pay off all of their debt
00:12:59
of cash on hand this tells us it won't
00:13:01
even take them one day to pay it all off
00:13:03
giving us that sense of a very strong
00:13:05
balance sheet so that is a very good
00:13:07
sign to note for AMD now we just want to
00:13:10
let you know we have released our latest
00:13:11
free weekly article we drop one every
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single Monday morning where we cover
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severely undervalued stocks as well as
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few days so click below you can sign up
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read straight away where you'll be able
00:13:23
to gain access to 46 undervalued stocks
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00:13:44
we have our updated valuation model here
00:13:46
given the earnings release yesterday now
00:13:47
our intrinsic price we want to talk a
00:13:49
little bit about this at 187 derived
00:13:52
from the DCF model as you can see we
00:13:54
have the free cash flow year- on-year
00:13:55
updated for 2024 now average growth
00:13:58
negative skewed it has gone from
00:14:00
negative to positive a number of years
00:14:02
now we have Stu with 30% we'll just talk
00:14:04
about that shortly but you can see we
00:14:06
have a low medium and high and as always
00:14:08
given these numbers are subjective you
00:14:10
can grab a copy of this model by
00:14:12
clicking on the pin comment below
00:14:14
running through your own numbers whether
00:14:15
it's for AMD or any others now with the
00:14:18
30% and the discount rate we get the
00:14:20
present value of the future free cash
00:14:21
flows and terminal value add together
00:14:23
with a cash subtract total debt get to
00:14:25
the equity value divide by the shares
00:14:27
outstanding and as you can see one 87
00:14:29
now this does indicate 73% upside and we
00:14:32
were sitting considering whether we used
00:14:34
25% in today's episode but given we have
00:14:37
the numbers here you can make the
00:14:38
decision for yourself depending on your
00:14:40
investment thesis but we will show you
00:14:42
for those that believe 25 to be more
00:14:44
accurate that would be
00:14:45
$135 indicating 25% upside and for those
00:14:49
that are a lot more bullish at 35%
00:14:51
around 258 giving it 139% and that is
00:14:54
more than a double and we have talked
00:14:56
about this we have kept it in is just
00:14:58
Bloomberg over the the last year do
00:15:00
believe this Market is going to grow at
00:15:02
42% year onye this would ultimately give
00:15:04
them an intrinsic value near $400 that
00:15:07
is more than a 3X from the current price
00:15:09
at
00:15:11
267 now today we will go through the
00:15:13
medium rate of 30% but honestly you
00:15:15
could also use the 25% depending on
00:15:18
where you see this company whether or
00:15:19
not you have faith that they can keep up
00:15:22
on the promise of increasing the Daya
00:15:24
Center Revenue at the rapid rate that we
00:15:26
did here in the earnings call yesterday
00:15:28
now what we do now is we're not finished
00:15:30
just yet we apply a margin of safety at
00:15:32
10% execute on that if it meets our
00:15:34
three golden criteria wide Moe strong
00:15:37
financial metrics and good
00:15:39
forward-looking data if you believe that
00:15:41
in today's episode a buy
00:15:43
$169 then we keep going till it's near
00:15:45
the current trading price and as you can
00:15:47
see in today's episode based on this
00:15:49
rate you do get quite a large MOS in
00:15:52
fact we can just take a look now you are
00:15:53
talking not at 45% but at least 40% up
00:15:57
to $112
00:15:59
Wall Street they have lowered their
00:16:00
price Target after the earnings call
00:16:02
still a buy given their signal at
00:16:05
$160 which they do see at 48% upside now
00:16:09
we can also do the same excise for those
00:16:11
that actually believe 30% is too high so
00:16:14
if we were to take through the 25% rate
00:16:16
to the final slide we will get our
00:16:17
intrinsic value of
00:16:19
$135 and as we do keep going in today's
00:16:21
episode you can see bang on 20% MOS at
00:16:25
this price with wre again they still do
00:16:27
believe the price at the end of 2025 to
00:16:30
sit near the $160 Mark indicating 48%
00:16:33
upside as always though give us your
00:16:35
thoughts on the valuation on the
00:16:37
earnings call itself whether this is one
00:16:39
you're buying holding or selling and
00:16:40
don't forget to sign up to the free
00:16:42
Weekly Newsletter grab those
00:16:43
spreadsheets come and also join us in
00:16:45
the patreon where we do cover our weekly
00:16:47
buys and sells we have been buying and
00:16:49
selling over the last few days and have
00:16:51
a great day we'll see you all on the
00:16:52
next one
