From BofA research report just came out -
Advanced Micro Devices, Inc Accelerating share gains, expanding margins, $5 in l-t EPS power Authored By Analyst Name - Vivek Arya ...... Key takeaways Strong results/guide, raising EPS ests. meaningfully 15-25% and now see $5 in l-t EPS; reit Buy, top compute pick, PO to $135 Likes: accelerating share gains can drive CPU share back to historical 25-30%+; GMs exiting 2021 at 50% (200bp+ above cons.) Risks: PC comps; real (or perceived) INTC risk; modest buybacks ($250mn vs. $4bn auth.); strong GPUs creates crypto noise ...... Raise estimates materially and take PO to $135 We reiterate Buy on AMD, a top computing pick, and raise our CY21/22/23E EPS by 17%/22%/23% to $2.50/$3.24/$3.87, with potential to reach $5 in pf-EPS exiting CY24E as server share gets towards historical 25-30% vs. 13% currently. We raise our PO to $135, from $120, as we roll forward to 35x CY23E PE (vs. 45x on CY22 prior) inline with AMD's median multiple and inline with EPS growth visibility. Despite industry-wide supply constraints AMD beat Q2 (sales $3.85bn, +99% YoY and $250mn/7% ahead, incl. data center >20% of sales, highest ever), and raised CY21E sales to industry-best +60% YoY (vs. 50% prior). This compares to rival INTC flattish growth suggesting AMD share gains are accelerating in the large/attractive high-entry-barrier computing market, with INTC product delays and foundry distractions providing further share gain opportunities for AMD in the $70bn+ server/PC market. Additionally, one of the most critical indicators for semis strength - namely GM - is now expected to exit CY21 at 50%, 200-300bps ahead of expectations, suggesting strong execution and support from foundry/back-end ecosystem.
Likes: accelerating share gains, GMs, enterprise momentum (1) Solid CPU share gains with value/unit share up 60bps/30bps QoQ. From 2018-21E AMD has taken ~60% share of incr. growth in PCs/75% in servers, an acceleration from the 48%/35% rate from 2016-21E. We believe this acceleration is sustainable and can drive share to historical 25-30% and beyond; (2) strong GMs with Q2 60bp ahead, Q3 guide 80bp ahead, and implied Q4 of 50% 200bp+ ahead of Street. Importantly, we don't see anything abnormal or 1-off in Q4 that pushed GMs higher, meaning sustaining at these levels/further improvement likely; (3) enterprise server demand accelerated in Q2 and AMD expects enterprise will be stronger in 2H, another tailwind for GM mix.
|