Advanced Micro Devices stock (NASDAQ: AMD) is anticipated to publish its Q3 FY’24 outcomes towards the top of October, reporting on 1 / 4 that’s more likely to see the corporate profit from stronger demand for synthetic intelligence chips. We anticipate AMD revenues to return in at $6.73 billion, marking a rise of 16% in comparison with final 12 months, whereas earnings are more likely to are available in at about 0.92 per share, barely forward of consensus estimates, and up 30% year-over-year. See our evaluation of Advanced Micro Devices Earnings Preview for a more in-depth take a look at what to anticipate when the corporate publishes its Q3 earnings.
The rise in AMD inventory during the last 4-year interval has been something however regular, with annual returns being significantly extra risky than the S&P 500. Returns for the inventory had been 57% in 2021, -55% in 2022, and 128% in 2023. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, is significantly much less risky. And it has outperformed the S&P 500 every year over the identical interval. Why is that? As a bunch, HQ Portfolio shares supplied higher returns with much less threat versus the benchmark index; much less of a roller-coaster journey as evident in HQ Portfolio efficiency metrics.
During the last quarter, Q2 2024, gross sales for the consumer section stood at $1.5 billion, up 49% year-over-year pushed primarily by AMD Ryzen 8000 Collection processors. Nonetheless, the PC market remained blended over Q3. Worldwide PC shipments stood at 62.9 million models in Q3, per Gartner, marking a 1.3% year-over-year lower. AMD’s development may very well be a bit higher, pushed by some market share features and potential stock replenishment by distributors following drawdowns seen in 2023. On the server aspect, AMD’s chips such because the fourth technology of the AMD EPYC CPUs might proceed to achieve market share over rival Intel, which confronted delays in transitioning to smaller, extra superior course of nodes.
AMD’s GPU gross sales are anticipated to broaden meaningfully, pushed by the surge in demand for AI-related workloads. Graphics processing models have develop into the de-facto chips for working AI purposes. AMD has launched new chips, such because the MI300X, focused at massive language mannequin coaching and inference for generative AI workloads. The corporate now expects information middle GPU income to exceed $4.5 billion in 2024, up from the $4 billion guided to in April. AI chip gross sales, reported in AMD’s Knowledge Heart section, soared 115% 12 months over 12 months to $2.8 billion, reflecting a major enhance in AI GPU shipments.
Given the booming demand for AI purposes and the necessity for alternate options to market chief Nvidia, AMD’s AI-related chip gross sales will seemingly surpass earlier estimates. The stronger income base and probably extra favorable product combine ought to drive AMD’s earnings larger. Adjusted gross margins rose 300 foundation factors during the last quarter to 53% and AMD is guiding for margins of roughly 53.5% for Q3. To make sure, Nvidia has been the most well liked of the AI shares, rising by roughly 2.5x this 12 months. However do you know that there’s a lesser-known AI title that might supply extra upside than Nvidia?
AMD trades at about 46x consensus 2024 earnings. Whereas this can be a excessive a number of, it’s justified by the continuing restoration within the PC market and a surge in demand from AI purposes might justify this to an extent. Furthermore, the latest reduce in benchmark rates of interest by the U.S. Fed might additionally profit AMD. Decrease rates of interest might cut back financing prices for builders of enormous information facilities, probably driving up capital spending within the area, and serving to gamers like AMD which promote CPUs and GPUs for servers. We worth AMD inventory at about $168 per share, about 8% above the present market value. We will probably be revisiting our value estimate for the corporate following Q2 outcomes. See our evaluation on AMD Valuation: Is AMD Inventory Costly Or Low-cost? for extra particulars on what’s driving our value estimate for AMD. Additionally, try our evaluation of AMD Income for extra particulars on the corporate’s key income streams.
| Returns | Oct 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| AMD Return | -5% | 6% | 1276% |
| S&P 500 Return | 1% | 22% | 160% |
| Trefis Strengthened Worth Portfolio | 3% | 18% | 787% |
[1] Returns as of 10/17/2024
[2] Cumulative whole returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
