AMD’s Stock Is Up More Than 4x Since February 2017- Here’s Why!

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Advanced Micro Devices’ (NASDAQ: AMD) stock price grew over 350% from ~$13 in February 2017 to ~$59 in February 2020, primarily due to a significant jump in the P/S multiple. Steady revenue growth also helped, although stock price gains were partly offset by a slight increase in the outstanding share count.

In our interactive dashboard, What Factors Drove The 350% Growth In AMD’s Stock In The Last 3 Years?, we break down the factors behind this move.

(A) AMD’s Total Revenue has grown 28% from $5.25 billion in 2017 to almost $6.73 billion in 2019, but is expected to grow by 30% to around $8.76 billion in 2020

  • AMD’s total revenue has grown from $5.25 billion in 2017 to $6.73 billion in 2019, led primarily by the success of AMD’s Ryzen processors and Radeon graphics cards.
  • These products have helped AMD make a dent in the market share of Intel and Nvidia, and have helped drive steady revenue growth over the past 2 years.
  • This growth primarily came from the computing and graphics segment, that has grown by $1.73 billion over this period, with enterprise, embedded, and semi-custom revenue, in fact, dropping by $260 million.
  • Going forward, we expect computing and graphics revenue to increase sharply in 2021, led by both Ryzen and Radeon products with AMD’s new 7nm chips.

(B) Revenue per share (RPS) increased from $5.52 in 2017 to $6.17 in 2019

  • AMD’s revenue jumped from $5.25 billion in 2017 to $6.47 billion in 2018, and this helped drive RPS from $5.52 to $6.59, despite an increase in the outstanding share count.
  • RPS dropped slightly to $6.17 in 2019 as a marginal revenue increase was offset by a >10% rise in share count.
  • We further expect RPS to rise to $7.40 in 2020.

(C) Price-To-Sales (P/S) multiple for AMD has risen steadily since 2017, and is more than 4x that of 2017 levels, going from 2.1x in 2017 to 9.6x in 2019. Below, we take a look at the factors behind this increase

  • AMD’s expenses as % of revenue has decreased from 100.5% in 2017 to 94.9% in 2019. Notable changes can be seen in Cost of Sales as a % of revenue, along with lower interest expense, which has led to rise in profitability.
  • As a result, Net Income increased from -$30 million in 2017 to $340 million in 2019. This can be attributed to higher revenues and elevated margins. Net income margin increased from -0.5% in 2017 to 5.1% in 2019. We expect net income to rise to $1.44 billion in 2020.
  • EPS has improved from -$0.03 in 2017 to $0.31 in 2019. EPS spiked to $0.35 in 2018 due to lower expenses, mostly due to a reduction in COGS. We expect the EPS figure to further increase in 2020.

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