Advanced Micro Devices (NASDAQ:AMD) still has a long way to go before it reaches the $1 trillion valuation club. Its current market cap of about $350 billion is impressive in its own right, but it underscores just how steep the climb remains to join that elite group.
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That climb, however, looks a bit less daunting when you consider the momentum behind AMD’s recent results. The AI chip giant posted $9.2 billion in Q3 revenue, up 36% year-over-year, and management is targeting a 35% CAGR over the next five years, a trajectory that points to ample room for expansion.
That performance and outlook form the backdrop for how top investor Keithen Drury views AMD’s longer-term path.
“AMD could be a $1 trillion company by 2028,” predicts the 5-star investor, who is among the top 3% of stock pros covered by TipRanks. “However, I think it’s a safe bet that it will get there by 2030.”
Drury supports his view with some math. He points to AMD’s trailing-twelve-month revenue of $32 billion and applies the company’s targeted 35% CAGR, which would lift annual revenue to ~$84.9 billion by 2028. Assuming a 25% profit margin, that would translate into about $21.2 billion in annual earnings.
Apply a 40x earnings multiple to that figure – a valuation below Nvidia’s current 53x and well under AMD’s present triple-digit multiple – and AMD would be looking at a market cap of ~$848 billion by 2028.
That’s not too far off the $1 trillion mark, adds Drury, and if the growth rate is slightly higher or the earnings ratio is more generous, it just might make it.
Drury reminds investors that AMD is playing in a very lucrative sandbox, and doesn’t need to surpass Nvidia in order to become a “large and dominant company.” On that score, AMD has been improving its products and software, and CEO Dr. Lisa Su has stated her belief that the company’s data center revenues will grow by a CAGR of 60% in the years ahead.
Summing up, regardless of whether AMD achieves trillion-dollar status in 2028 or a few years down the road, Drury is ready to jump onboard.
“Any stock that can nearly triple in under five years is a fantastic investment, and if AMD can hit its projections, it will be a must-own stock over the next five years,” sums up Drury. (To watch Drury’s track record, click here)
Wall Street is mostly going along for the ride as well. With 28 Buys and 10 Holds, AMD carries a Moderate Buy consensus rating. Its 12-month average price target of $284.67 implies an upside of ~31%. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.