Semiconductor giant Advanced Micro Devices (NASDAQ:AMD) is due to report its Q1 2024 earnings on April 30. What should investors expect?
TD Cowen’s Matt Ramsay, a 5-star analyst rated in the top 1% of the Street’s stock pros, has a few thoughts on that score. The short story here is that Ramsay thinks investors have nothing to worry about. AMD’s earnings will be “easily good enough” to justify the stock’s current price of less than $150 a share.
That’s the first bit of good news about the fact that AMD stock has lost 30% of its value since hitting its all-time high of $211 a share back in the first week of March. The stock’s been hit so hard already, that there’s little risk of further downside coming after the earnings report.
The other good news is that, in contrast to AMD having little downside, the stock might actually have quite a bit of upside potential. Indeed, Ramsay believes that AMD stock could rise as high as $200 over the next 12 months, almost returning to its all-time high. It almost goes without saying that he thinks you should buy AMD stock. (To watch Ramsay’s track record, click here)
And why does he think this?
You’ll no doubt be shocked to learn that artificial intelligence lies at the heart of his recommendation. MI300, AMD’s much-anticipated AI chip, is looking like it’s going to be “the fastest product ramp in AMD’s history.” What’s more, while rumors have been floating about various “bumps” in the road to rolling out MI300, Ramsay demurs that “everything is generally on track for the MI300X ramp at Microsoft, Oracle, Meta, and others,” such that AMD can expect to reap significant revenue growth from this product.
Indeed, while AMD has tried to set conservative expectations for $3.5 billion in revenue from MI300 this year, Ramsay thinks it’s entirely possible that sales could reach $4 billion, $4.5 billion, or even more. And by 2025, the analyst forecasts the new AI chip will generate sales in the $8 billion to $9 billion range – with demand and sales continuing to accelerate from there. In addition to the big names mentioned above, AMD has said it has literally “dozens of cloud, enterprise, and supercomputing customers planning MI300 deployments.” The analyst forecasts sales of $15 billion in 2026, for example, and $20 billion in 2027.
And all of this, remember, is for just one of AMD’s products.
More broadly, Ramsay says AMD’s datacenter business is doing just fine (even before MI300 hits). Weakness, where there is weakness, will reside in the familiar problem areas of embedded chips (meaning chips for automobiles and industrial applications) and also in gaming chips for consoles and PCs. These, however, are industry-wide problems – not specific to AMD at all.
Based on these assumptions, Ramsay expects to see AMD grow earnings from the $2.65 per share it reported last year, to $3.63 per share this year, $5.55 next year – and ultimately, to $10 per share in 2027, resulting in a compound annual earnings growth rate of nearly 40%.
Whether that’s fast enough to justify paying 290 times trailing earnings for the stock, however, is a different question entirely.
All in all, it’s clear that Wall Street agrees with Ramsay’s call on this. The stock has 35 recent analyst reviews on file, including 29 Buys and 6 Holds, resulting in a Strong Buy consensus rating. With an average price target of $202.81 and a current trading price of $146.64, this stock shows a potential one-year upside of 38%. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
