Advanced Micro Devices (NASDAQ:AMD) designs and manufactures microprocessors for the computer and consumer electronics industries. More specifically, its sales are in graphics processing units (GPUs) and central processing units (CPUs). With successful chip products delivered to data centers and the gaming industry, the last few years have been great for AMD stock.
What’s more, this company has a notable and competitive product pipeline that has the potential to take on a large market share. Advanced Micro Devices has turned out to be a winner, even in a pandemic. That’s a notable feat.
But what should really interest you about this pick? Well, the revenue and sales numbers speak for themselves.
AMD Stock and Impressive Product Releases
The first thing you should consider when it comes to AMD stock is the company’s wide range of products. Fundamentally, it is the products and their performance that matter. So, let’s take a look at the line up for 2021 and 2022.
First, AMD’s Ryzen processor is strong and consistently drives revenue. It’s even described by some as the “fastest mainstream-platform gaming CPU” out there. Advanced Micro Devices reported a high third-quarter revenue partly driven by a rise in Ryzen sales. So, the product makes AMD a leader in desktop processors, giving it a substantial edge in the market.
In fact, the Ryzen 5000 series has made incredibly strong performance gains, with a 19% “improvement in instructions per clock (IPC).” Additionally, PCWorld even agrees that “there is a clear case for AMD’s claims that the Zen 3-based Ryzen chips are the ‘best gaming CPUs.’” All in all, AMD was able to tout strong performance improvements in gaming, video editing and computer-aided design with the new chips. And on top of that, the company has made significant impact with its “ultrathin” 4000 series, the Radeon RX 6000 series and more.
As a result, AMD’s biggest rival — Intel (NASDAQ:INTC) — is losing hold of the market due to outmatched performance and an inability to capitalize on semiconductor demand. It’s even lost clients like Apple (NASDAQ:stock-ticker”>AAPL). Meanwhile, in the desktop and PC market, AMD has a significant share of roughly 20% and growing. Plus, Microsoft (NASDAQ:stock-ticker”>MSFT) recently asked AMD to help increase production to meet the demand for its latest Xbox consoles. Because of this, management expects revenue to be even better for AMD in Q4.
Finally, Advanced Micro Devices recently made a deal to acquire Xilinx (NASDAQ: XLNX), a leader in the high-performance computing industry. This acquisition has boosted AMD stock and will open up new markets, such as defense and aerospace.
Strong Financials Are Driving Stock Performance
Of course, these noteworthy increases in product performance have bolstered the company’s financials. Unsurprisingly, AMD had great third-quarter results.
In Q3, revenues hit $2.8 billion, a 56% year-over-year (YOY) increase. Additionally, operating income was $449 million (up 141% YOY from $186 million) and net income was $390 million (up 225% YOY from $120 million). Finally, diluted earnings per share (EPS) went up from 11 cents to 32 cents. Cash and cash equivalents stood at $1.77 billion for the quarter.
Needless to say, AMD is doing well. But it’s not stopping there. For Q4, the company expects a 41% increase on revenues of $3 billion and a 41% YOY increase for 2020 overall. That, of course, will lead to a rapid rise in EPS. Plus, the company has a substantial free cash flow margin which means significant investment in capital and higher rewards for shareholders.
So, the stock certainly has long-term potential. AMD has an outstanding slate of new products ready to release and its high performance is expected to continue well into 2021 and 2022. Based on that, shares could easily cross $100 in the coming year.
Bottom line? If you own AMD stock, hold your horses and wait for the right time to book profit.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.