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Technology Stocks : AMD, ARMH, INTC, NVDA -- Ignore unavailable to you. Want to Upgrade?

To: Joe NYC who wrote (53411)

2/1/2024 2:40:02 AM

From: Vattila

Read Replies (2) | Respond to of 72154

Thanks. Yes, Intel is competing hard now.

Obviously, AMD's problem in the Client segment is not just the size of the PC market, which is recovering to a decent level after the inventory correction. It is the depressed average-selling-price. While AMD’s revenue in the Client segment has recovered nicely in the last couple of quarters, and now approaches pre-pandemic levels, the operating margin is not recovering much.

Client (millions)	2021-Q2	2021-Q3	2021-Q4	2022-Q1	2022-Q2	2022-Q3	2022-Q4	2023-Q1	2023-Q2	2023-Q3	2023-Q4
Net Revenue	$1,728	$1,692	$1,829	$2,124	$2,152	$1,022	$903	$739	$998	$1,453	$1,461
Operating Income	$538	$490	$530	$692	$676	-$26	-$152	-$172	-$69	$140	$55
Operating Margin	31%	29%	29%	33%	31%	-3%	-17%	-23%	-7%	10%	4%

Obviously, the competition with Intel is now fierce, with Intel cutting cost and waging a bloody price war, presumably in an effort to stem market share loss and keep factories utilised. I wonder whether it is sustainable, or just a last ditch attempt to hold the fort until they can get Intel Foundry Services off the ground with enough external customers to not all depend on client PC sales for factory utilisation.

On the bright side for AMD, the recovering revenue at depressed ASP indicates some unit share gain. Increased share may turn to nice profit if the price pressure eases.

Now, looking at AMD’s prospects over the next 3 years, the forecasted $3.5B in AI GPU sales this year is not enough on its own to support my Optimistic scenario posted earlier. If the rest of the business remains stagnant, $3.5B is just $3.1B growth (assuming ~$0.4B in AI GPU sales in 2023, according to the earnings call), which equates to +14% growth, well below the +25% annual revenue growth I have modelled for my Optimistic scenario.

Modelling a Stable scenario with more modest +14%, +17% and +20% annual revenue growth for the years 2024-2026, I get ~$36B revenue and ~$6 EPS in 2026 (with 55% gross margin, 25% OPEX and 30% operating margin). This would require a P/E ratio of 17-33 to support a $100-200 stock price.

Feel free to play with the numbers at my OneDrive.