Semiconductors
Updated on August 18, 2024, by Mark Pukhov
AMD is an American semiconductor company that designs, develops, and markets a variety of products,
such as CPUs, GPUs, APUs, and other related products and technologies.
Though its stock has declined recently, the returns that it provided are much higher than those of the S&P 500 index for the past 5 years (95.05%).
5Y:
400.71%
4,622.44%
ALL:
AMD's profit margins (%) for the past 6 years:
46.12
44.93
48.25
44.52
42.60
37.79
2018
2019
2020
2021
2022
2023
14.02
9.37
6.96
22.19
5.35
1.77
25.50
5.06
5.20
19.24
5.59
3.76
AMD's ROE and ROA (%) for the past 6 years:
1.53
2.41
42.17
42.66
12.06
26.62
2018
2019
2020
2021
2022
2023
27.78
5.66
7.40
25.46
1.95
1.29
The performance of some metrics seems to be lacking and inconsistent, but the stock price has been climbing up anyway, so why is that so?
$148.56
Most likely, this increase is due to its rapidly growing revenue, which has almost quadrupled between 2018 and 2023.
22.68
23.60
16.43
9.76
6.73
6.47
2018
2019
2020
2021
2022
2023
Now that we've seen AMD's past performance it's time to look at its current and mrq KPIs to determine if its stock is a buy.
AMD's PE ratio is 3.31 times higher than the semiconductor industry average of 54.02, being the highest ratio and exceeding value investors' threshold of 15-20.
amd's
179.01
Its PEG ratio is 3.14 times higher than the semiconductor industry average of 1.73 and surpasses the value investor's threshold of 1.0.
amd's
5.44
Following the trend, AMD's P/FCF ratio is 3.34 times higher than the industry average of 53.11,
amd's
177.19
exceeding the value investor's threshold of 10.
Surprisingly, the fourth KPI, price-to-sales ratio, is lower than the industry average of 13.12,
amd's
10.33
but still higher than the threshold of 2 that investors look for.
AMD's price-to-book ratio is not the highest in the semiconductor industry, like PB of Pixelworks (95.72),
amd's
4.25
but it still exceeds the threshold of 1 that investors prefer.
The last KPI that we'll look into is AMD's intrinsic value (IV). Ideally, its market price should be lower than its intrinsic value.
Fortunately, AMD's market price of $148.56 is 3% lower than its base-case intrinsic value; plus, it's lower than even its best-case IV by 26%.
$153.71
$201.70
But the situation is unusual: KPIs indicate overvaluation, but the intrinsic value suggests a margin of safety, though less than Warren Buffett's typical 50%.
Risks of investing in AMD:
1. Competition (Intel Corporation).
2. Economic and market uncertainty.
3. Public health.
4. Seasonality.
5. Dependency on third-party manufacturers
6. Regulations, etc.
Though there are risks, they are not inevitable. Similar to Nvidia, AMD is also benefiting from AI-driven demand, so let's see what analysts have to say about this stock.
“... AMD is well positioned to see revenue expand even more in coming quarters, making its stock worth buying and holding for the long term.”
#1
“AMD stock has received a consensus rating of buy. The average rating score is and is based on 84 buy ratings, 14 hold ratings, and 0 sell ratings.”
#2
In my opinion, AMD stock has potential but lacks a sufficient margin of safety and shows inconsistent KPIs, such as operating and net margins, as well as ROE and ROA.