AMD Earnings Preview- Positioned for growth but is MI300 upside baked into the stock

Advanced Micro Devices, Inc. (AMD), a leading AI semiconductor company, is garnering significant attention from investors and analysts alike due to its growth potential. With a market cap of $286.35B and an enterprise value of $283.42B, AMD operates in four key segments: Data Center, Client, Gaming, and Embedded. 

The semiconductor industry has seen growth in CY23 due to the ChatGPT moment, ASP increases, double ordering, and Chinese companies stockpiling. Despite the recent corrections in gaming and embedded segments, AMD's share stabilization and continued server share gains provide some assurance in the face of total available market (TAM) uncertainty. AMD remains well-positioned to continue gaining profitable share in premium and commercial market segments, especially with the anticipated launch of AI PCs in the second half of the year.

AMD is currently covered by 32 Wall Street analysts, who, on average, rate the stock as a Strong Buy. This positive sentiment reflects the market's confidence in the company's prospects. 

AMD trades with a forward P/E ratio of 46.95, higher than the current forward P/E for the S&P 500, which stands at 22.34. In comparison, the Technology sector, where AMD primarily operates, has a trailing twelve-month price-to-earnings ratio of 38.33. AMD's valuation implies high expectations and potential growth. 

Bank of America raised its price target for AMD from $165 to $195 per share , while Susquehanna increased its PT to $210 from $170. However, Susquehanna expects slight disappointment in AMD's Q1 guidance but remains bullish on the company's MI300, a crucial revenue driver for the Data Center segment. Susquehanna believes that MI300's potential upside is already factored into the stock price, cautioning investors to consider post-print weakness as a potential opportunity to add to their positions. 

The MI300 Upside: Susquehanna expects improving MI300 revenue, potentially leading to sequential growth and upside into Q1. Full-year revenue estimates for MI300 need to be updated from >$2B to >$3B. Some investors have even set higher targets, suggesting around $6B. While Susquehanna acknowledges the high expectations, it remains bullish on MI300 and advocates using any weakness in the stock as a buying opportunity. 

KeyBanc expects higher results and guidance for AMD, supported by improving Genoa demand and server share gains. Despite traditional server weakness and slightly lower-than-expected PC demand, AMD's prospects remain favorable. 

UBS displays increased confidence in AMD's data center GPU revenue opportunity and raises its estimates and price target to $220. Recent channel and customer checks indicate firm demand commitment for over 400k MI300A/X units for 2024. This suggests a potential run-rate of close to $10B/year, propelling AMD's growth in the GPU market. 

While acknowledging AMD's potential in the artificial intelligence (AI) market, Northland believes AMD's shares already reflect higher AI revenue in the future. Al chip revenue is forecasted to reach $125B in CY27, and Northland models AMD with $16B in Al revenue and a 13% market share. However, Northland believes that AMD's shares reflect higher Al revenue in CY27.

Advanced Micro Devices (AMD) shows strong growth potential, supported by positive sentiment from Wall Street analysts. Key themes , such as the MI300's revenue potential, Genoa demand, and server share gains, drive bullish views on the stock. Conversely, concerns over valuation prompt a more cautious stance from some analysts. As with any investment, it is crucial for readers and investors to conduct their own research and exercise caution.

As the AI revolution unfolds , AMD's growth potential and investment value have attracted the attention of Wall Street analysts. The company's strong market position, evolving product line, and continued efforts to capture a larger market share in data centers and AI-powered devices position it well for future growth. However, the current valuation and potential market challenges need to be carefully considered when making an investment decision.the current valuation and potential market challenges need to be carefully considered when making an investment decision.the current valuation and potential market challenges need to be carefully considered when making an investment decision.