Here’s Why AMD’s Stock Grew 70% In 2018

by Trefis Team
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AMD’s (NYSE:AMD) stock price moved up over 70% in 2018. We break down the change in stock price into 4 factors: AMD’s Stock Price = (Revenue x Margins ÷ No. of Shares) x P/E Multiple. Notably, AMD’s shares have gained primarily from an increase in margin and revenues in 2018. However, there has been a sharp decline in the earnings multiple over the period.  You can look at our interactive dashboard analysis ~ Why Did AMD’s Stock Grow Over 70% In 2018? for more details. In addition, you can see more of our data for information technology companies here.

#1. The biggest change in revenue has been in the company’s Computing & Graphics segment, which has grown 39% from 2017 to 2018, while the Enterprise, Embedded & Semi-Custom grew only 3% during the same period.

  • AMD manufactures and markets microprocessors used in servers, desktops, and notebooks. It reports its revenues under two segments ~ Computing & Graphics, and Enterprise, Embedded & Semi-Custom.
  • Computing & Graphics includes revenue from sales of microprocessors and graphics processors for desktops and notebooks.
  • The segment revenues of $4.13 billion in 2018 reflected 39% y-o-y growth, and it accounted for 64% of the company’s total revenues.
  • Enterprise, Embedded & Semi-Custom includes revenue from the sale of embedded processors, semi-custom system-on-chip (SoC) products, development services and technology for game consoles, and server microprocessors.
  • The segment revenues of $2.35 billion in 2018 reflected a 3.3% y-o-y growth, and it contributed 36% to the company’s top line.
  • Both the segments could see higher revenues for the full year 2019, led by ramp up of its new 7nm chips based products.

#2. Adjusted net income grew with AMD’s revenues from 2017 to 2018, led by strong growth in margin.

  • AMD’s adjusted net income grew from $103 million in 2017 to $514 million in 2018. and it could grow to $762 million in 2019.
  • This can be attributed to higher revenues and growth in adjusted net income margin.
  • Adjusted net income margin grew from 2.0% in 2017 to 7.9% in 2018, and it could grow to 11.1% in 2019.

#2.1 Operating costs grew from $5.1 billion in 2017 to $6.0 billion in 2018. However, operating costs as a percentage of revenues actually declined.

  • COGS as % of revenue declined from 66% in 2017 to 62% in 2018, and we expect it to be around the 62% mark in 2019.
  • R&D as % of revenue declined from 23% in 2017 to 22% in 2018, and we expect it to be around the 22% mark in 2019.
  • SG&A as % of revenue declined from 10% in 2017 to 9% in 2018, and we expect it to be around the 9% mark in 2019.
  • Other operating expenses as % of revenue grew from -1.9% in 2017 to -0.8% in 2018, and it could remain around the same mark in 2019 as well.

#2.2 Adjusted EPS has also seen strong growth, led by better margin.

  • Adjusted EPS grew from $0.10 in 2017 to $0.44 in 2018, and we forecast it to be $0.65 in 2019.
  • Shares outstanding increased from 1,039 million to 1,165 million in 2018.

#3. Price To Earnings Multiple for AMD saw a sharp decline from 104x in 2017 to 40x in 2018.

#3.1 We estimate the fair price for AMD to be $28 based on an earnings multiple of 43.7x and $0.65 EPS in 2019.


  • Over 70% growth in AMD’s stock from the end of 2017 to the end of 2018 was driven by:
    • Revenue growth of about 23%, primarily due to >35% increase in Computing & Graphics business.
    • Adjusted net income margin expansion of close to 600 bps.
  • Growth was countered by:
    • A sharp contraction in the price-to-earnings multiple.
    • Slight growth in number of shares.


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