AMD Stock Forecast (NASDAQ: AMD): Why AMD Is A Strong Buy Right Now

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Summary:

  • AMD’s stock shot up more than 9% during the after-hours trading on April 25. AMD comfortably beat the EPS and revenue estimates of Wall Street.
  • The Q1 2018 earnings report of AMD also revealed that its Computing and Graphics segment has posted its 5th consecutive quarter of double digit Year-over-Year growth.
  • Thanks to stronger Ryzen processors sales, AMD posted an EPS of $0.11 (beats by $0.2), and revenue of $1.65 billion (+39.8% year over year) – beats by $80 million.
  • The reasons why AMD is beating estimates are the same. Cryptocurrency miners still bought many Radeon discrete GPUs. Ryzen APUs and processors are also finding more customers.
  • Do not worry about the forthcoming release of ASIC miners. They do not threaten the lucrative tailwind of AMD from Ethereum miners.

I was correct in my conclusion in a Seeking Alpha article that cryptocurrency miners again boosted Advanced Micro Devices’ (AMD) Q1 2018 business performance. AMD beats earnings estimates by reporting EPS or $0.11 (beats by $0.2) and revenue of $1.65 billion (beats by $80 million). AMD estimated that 10% of its $1.65 billion quarterly revenue came from cryptocurrency miners.

The Computing & Graphics segment enjoyed its fifth consecutive quarter of y/y growth. For the first quarter of this year, Computing & Graphics earned $1.115 billion, up 95% Y/Y and +23% Q/Q. This segment also has a new tailwind from MSI’s new “Combat Crate” package which bundles an MSI B350 Tomahawk motherboard, an 8GB Radeon 580 discrete GPU (Graphics Processing Unit) graphics accelerator card, and Ryzen 5 1600 processor.

New Generation Ryzen Processors Are Better And Cheaper

AMD can sell its first-generation Ryzen processors to bundle specialists like MSI. By offloading last year’s Ryzen processors to partners like MSI, AMD can concentrate on marketing its cheaper but faster 2nd-Gen Ryzen processors. Yes, market share can be taken away from Intel (INTC) by selling sub-$170 Ryzen Vega APU (Accelerated Processing Unit) products. However, there’s still a higher margin possible from selling $329 Ryzen 7 processors and $600++ discrete Radeon Vega graphics cards.

In other words, AMD will make more money by marketing its standalone CPU and GPU products. The outstanding gaming and multi-threading compute benchmark scores of 2nd-Gen Ryzen 7 and Ryzen 5 processors can help AMD post another double-digit Q/Q and Y/Y growth in its Computing and Graphics segment.

The 8-core Ryzen 7 2700X can outperform Intel’s flagship Coffee Lake Core i7-8700K on single-core and multi-core heavy duty tasks. It is ideal for gamers, content creators, game developers, and digital artists. Unless Intel can come up with 10nanometer processors this year, 2nd-generation 12-nanometer Ryzen processors will experience rapid growth in popularity.

(Source: TechRadar)

Expect Cryptocurrency Mining to Again Boost Q2 2018 Numbers

Since there is still no ASIC miner available yet which can mine Ethereum, I am highly confident that cryptocurrency miners will again boost AMD’s Q2 2018 numbers. I believe AMD is purposely understating cryptocurrency miners’ contribution. My own estimate is that crypto-centric GPU purchases contribute 15% to 20% to AMD’s topline. Since Q2 2017, the best Radeon GPU products are still sold far above their suggested retail prices.

As long as Ethereum’s trade value is above $600, AMD GPU products will continue to suffer from scarcity and sky high prices.  Consequently, AMD will be doing a disservice to its shareholder if it also doesn’t jack up the prices of Vegan and Polaris GPU chips that it supplies to third-party video card vendors.

AMD stock’s price rose more than 9% higher during after-hours trading after it made its Q1 2018 ER. The bullish run on AMD last night is just reward for AMD’s impressive Q1 performance. The $1.65 billion it earned last quarter is 40% Y/Y and 23% Q/Q. This in spite of the fact that post-Christmas holiday shopping blues usually handicap Q1 consumer spending.

 

Conclusion

AMD’s management has guided for $1.725 billion for Q2 2018 revenue. This is another huge 50% Y/Y growth estimate. Opportunists should take this opportunity to go long AMD now. Dr. Su and her management team won’t be making a bullish second-quarter guidance if they didn’t already signed many chip supply agreements with top PC vendors, retailers, add-in board manufacturers, and foundry partners.

Wall Street analysts now have an average of $14.50 one-year price target for AMD. It can be profitable to heed this upbeat outlook for AMD from Wall Street analysts. We should buy the stock now while it trades below $11.

(Source: TipRanks)

Its bullish one-year market trend forecast score backs my buy rating for AMD. The 0.77 predictability score confirmed that I Know First has a long track record of correctly predicting AMD’s one-year stock movement.

Past I Know First Forecast Success with AMD

AMD Stock Analysis

I Know First has made accurate predictions on AMD in the past, such as its 1 year bullish article published on January 20, 2017. In the article, we discussed AMD continuing the positive growth trend and the potential for future growth of product sales. Since the article’s release, AMD shares have increased by 4.09% in line with the I Know First algorithm’s forecast. See chart below.

This bullish forecast for AMD was sent to I Know First subscribers on January 20, 2017.

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I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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