semiconductor company Advanced micro-devices (NASDAQ: AMD) just reported their fiscal Q3 earnings on November 1, 2022, with mixed results, but a few key points give them an edge. First, revenue is up 29% year-over-year to $5.57 billion. In addition, net profit increased 23% to over $1 billion. And they managed to do so when the PC market weakened due to shortages of chips and other computer components.
Now, the stock value may have fallen this year, but it should be noted that the price is still well above the historic low of $1.72 (June 2015). It should also be noted that AMD’s lows have recovered repeatedly over the past 40 years.
Looking ahead, AMD remains optimistic, with a current share value of $60.60 and projected revenue in 2022 between $23.2 billion and $23.8 billion. This could represent a growth of about 43% compared to last year.
AMD earnings and sales signal gains momentum
Yes, AMD is having a tough year. They started relatively strong and beat the Q2 profit per share (EPS) price target of $1.03 with a few cents. However, this was likely a holdover from the previous two quarters, when reported gains were at least a dime above range each time. And the decline becomes more apparent when we look at the most recent quarterly report, which indicates earnings ($0.67) fell short of estimate. Fortunately, it was still well above the low ($0.53) range.
although EPS is down 8%, so far it should be noted that this is because the number of shares has increased dramatically. EPS is now $0.67 (just below the $0.69) estimate, but the fact that investors want to hold more shares of the stock certainly implies its strength.
The turnover for the respective quarters is perfectly in line with the profit development. Quarterly sales surpassed the range in the fourth quarter of 2021 and the first quarter of 2022 and then simply met the estimate in the second quarter of 2022. Revenue in the most recently reported quarter also fell short of estimate, as did earnings .
On an annual basis, the figures follow a similar trend. In both 2018 and 2019, sales more than met estimate and profits followed suit, beating the estimate by a cent or two. However, in 2020, sales surpassed the high range, as did profits. This tells us that AMD’s revenues are consistently affected by sales; and if analyst forecasts are correct, revenue should grow as they expect sales to rise.
Their next reporting date could be as early as January 31, 2023.
Advanced micro-devices outperform its competitors
Advanced Micro Devices is one of the most notable names in the world of computers and technology, especially when it comes to the components they make. Another company with similar prominence is likely Intel, whose processors are often the benchmark. But while these two companies have a lot in common, their financial situation couldn’t be more different.
First, AMD currently has a [moderate] BUY rating while Intel (NASDAQ: INTC) has a HOLD rating. This is probably because AMD’s advantage (62.0%) is more than double INTC. In addition, AMD’s P/E ratio ($25.37) is three times that of INTC. They also beat INTC in terms of return on equity and return on assets (15.17% and 12.02%), respectively, and expect about 30% higher expected earnings growth.
In fact, Intel only outperforms advanced microdevices in a number of areas. For a, INTC has a price-sale ratio (P/S) of 1.43, which is about four times better than AMD’s (5.93). Plus, INTC is the only stock we’re comparing right now with a net positive beta of 0.73, meaning it’s 27% less volatile than the S&P 500. AMD has a beta of 2.04!
When it comes to beta measurement, another AMD peer actually breaks even. Indeed, Texas Instruments (NASDAQ: TXN) has a beta size of 1, and has a better positioning than the other two, despite its HOLD rating. First of all, their current share value ($157.39) is in the bottom 25% of the stock’s 52-week range; INTC and AMD are in the bottom 7% and 5% respectively. In addition, Texas Instruments scores extremely high in: net margin (44.21%), Return-on-Equity (63.68%) and Return-on-Assets (35.37%), all of which are at least 3 times higher than the same AMD and INTC metrics.
However, analysts expect TXN to decline this year, with a expected earnings growth value of -13.48%. This makes them a much riskier investment, even with other impressive factors.
So when considering each variable, AMD can hold the most promise, both in the long and short term, which is why analysts have it a [moderate] BUY review.