AMD crushes it, Lisa Su crushes it: Here’s how to trade it

crushed it! OK, maybe I’m a little biased. Maybe I am Long Advanced Micro Devices (AMD). Maybe Lisa Su was already my favorite CEO of all time. Maybe, just maybe, when Advanced Micro Devices released the firm’s first-quarter financial results on Tuesday night, the firm broke the cover of the ball. maybe.

For the three-month period ending March 26, 2022, Advanced Micro Devices posted adjusted EPS of $1.13 (GAAP EPS: $0.56) on revenue of $5.9B. Both these top and bottom line results easily outperformed Wall Street. That’s an earnings growth of 117% on sales growth of 71.2% for those keeping score.

Looking at numbers within numbers… Adjusted gross margin improved (an eye-popping 660 bps) to 53% from 46% a year ago. Adjusted operating income grew 141% despite a 62% increase in adjusted operating expenses. This results in adjusted operating margin that increased nine full percentage points to 31%. Excluding Xilinx, adjusted revenue increased 55%, adjusted gross margin increased from 46% to 51%, while adjusted operating income increased 110% and adjusted operating margin increased 30%. Corporate execution has been excellent. The numbers are startling.

segment display

computing and graphics

… includes desktop and notebook processors and chipsets, discrete and integrated GPUs, data center and professional GPUs and development services

Revenue grew 33% y/y, and 8% sequentially to $2.8B (a new record), driven by Ryzen and Radeon processor sales year over year and Ryzen processor sales quarter over quarter .

— Record operating income of $485M to $723M for the year-ago period.

Average selling price increased both y/y and q/q driven by a rich mix of Ryzen processor sales.

Enterprise, Embedded and Semi-custom

… include technology for server and embedded processors, semi-custom, system-on-chip (SoC) products, development services and game consoles

Revenue grew 88% y/y and 13% sequentially to $2.5B (a new record), driven by sales of EPYC processors as well as sales in both the semi-custom and embedded product spaces.

– Record operating income of $277M to $881M for the year-ago period.

– Operating income improved due to higher revenue and $83M licensing profit.

zilinux

… includes Field Programmable Gate Arrays (FPGA), Adaptive Systems-on-Chips (SoC), and Adaptive Computer Acceleration Platform (ACAP) products.

Partial quarter revenue was $559M with operating income of $233M. On a pro-forma basis for the full quarter, Xilinx generated over $1B in revenue (+22%) driven by growth across all major end market categories. (The deal closed in mid-February.)

On this comment…

On the call last night, CEO Lisa Su said the Xilinx deal as well as the planned Pensando acquisition has brought AMD to a “critical inflection point” in the firm’s transformation. Su said, “The strategic importance of the Xilinx acquisition to our long-term goals cannot be overstated. As the industry’s number one provider of FPGA and adaptive computing solutions. Xilinx significantly expands our technology and product portfolio. is.”

Outlook

For the current quarter, AMD expects to see revenue of approximately $6.5B, which bodes well for year-over-year growth of 69% and sequential growth of 10%. This is also $6.4B above the Wall Street consensus. The firm also expects Q2 adjusted gross margin to print closer to 54%, which is up from the 51% or so Wall Street was looking for.

For the full year 2022, AMD expects revenue in the region of $26.3B. If realized, that would augur well for 60% year-over-year growth, and crush prior guidance for 31% growth. It also beats the consensus outlook for $25.2B. Here too, the firm now expects gross margin to end up around 54% from prior guidance of 51%.

That aside… AMD repurchased $1.9B in common stock during the first quarter, leaving $8.3B in current (and recently beefed up) authorization.

wall Street

I can find nine sell-side analysts who are rated five star by TipRanks and consider Advanced Micro Devices as these earnings release last night. Have seven “Buy” or equivalent ratings and two “Hold” or equivalent ratings. In this way these nine went on Tuesday night. There has been some movement at the target prices in both directions.

The average target price for these nine analysts is $141.67, with a high of $200 (Hans Mossmann of Rosenblatt) and low of $98 (Harsh Kumar of Piper Sandler). Seven “buys” average $152.43, while two “holds” average $104.

my thoughts

AMD crushed it. re. Lisa Su crushes it again. The environment is undeniably tough for chip stocks. I am a firm believer in the almost permanent state of demand for everything in this industry. It won’t all end so soon. As supply catches up to demand and as global economies struggle, I suspect the prices of all kinds of chips may continue to rise. As inflation slows (if it does slow down), chips and technology in general will not be discounted.

That said, with AMD, Nvidia (NVDA) being the cream of the crop in creating cutting edge in so many growing industries. NVDA still trades at 35x forward-looking earnings, AMD at a more reasonable 22x. Yes, I connected AMD first and then reduced the exposure to AMD on the way down. That was risk management. I’m still a believer, and AMD came in as the third-largest long position on my book in earnings.

Readers can see that the past few days have been kind to AMD, when the descending triangle in early January through early April put some pressure on the stock. Relative strength, the full Stochastics oscillator and the daily MACD all look better than they were at the end of April.

Currently, I look to the stock’s 50-day SMA ($105) as a pivot. This would allow, if taken conservatively for a target price of $126… I could see $132. add? Between $90 and $85. panic? Maybe not. A new 2022 would force less risk reduction.

(Holdings in AMD and NVDA are Action Alert Plus Member Club, You want to be cautious before buying or selling these stocks? Learn more now.,

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