Nasdaq AMD

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There's no question that semiconductor giant Intel (NASDAQ: INTC) is struggling. The company has made misstep after misstep on the manufacturing side of its business, squandering its lead to third-party foundries and opening the door for rival AMD to catch up. AMD is now competit

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Advanced Micro Devices (AMD) has gone from strength to strength in recent years. While the company has become a giant in the semiconductor industry, it has also been incrementally eating away at its traditionally much bigger rival Intel’s dominance.

The wide gap has begun to close between the two companies and Northland analyst Gus Richard thinks it is about to get narrower still.

“We expect by CY22 AMD will be 30% the size of INTC, up from 9.2% in CY18,” the 5-star analyst said. “We expect the delta between INTC and AMD GM will decrease by 13.1% during this period. Also, we estimate that AMD's GM to exceed INTC's in CY23. AMD’s market share gains are likely to continue in 2H:21 and CY22 driven by corporate client and server.”

Richard expects AMD will have a “strong” Q2, but the analyst also points out that as the economy reopens, it is very likely the outsized demand for PCs seen during the pandemic era will fade.

So, bad news for AMD, right? Not necessarily. Simply put, Richard thinks AMD’s recent products are better than Intel’s, and due to its competitor’s missteps, AMD has been making inroads with a hard-to-crack client base – corporate customers.

Intel’s 14nm and 10nm shortages gave AMD a way into the corporate market, which the company can now build on.

“We estimate that AMD currently has a 5% to 7% share of the higher-margin corporate client market and expect its share to accelerate as corporations dual source,” the analyst noted.

There is also increasing evidence, says Richard, that Intel is more focused on “low-end” Chromebooks, which bodes well for “a strong 2H for AMD in the client market.”

While Richard thinks AMD’s revenue share in PC clients amounts to approximately 20% right now, over the next couple of years, he expects it to get closer to 50%.

Further bolstering the case for AMD is the anticipated closing of the Xilinx deal, which Richard believes will “significantly broaden AMD's IP portfolio and broaden its exposure to comms, industrial and automotive markets.”

So, all good news for AMD but what are the implications for investors? Richard reiterated an Outperform (i.e., Buy) rating on the shares and keeps the $116 price target intact. Investors could be sitting on gains of 49%, should the analyst’s thesis play out in the year ahead. (To watch Richard’s track record, click here)

Not all of Wall Street’s analyst corps are currently behind AMD but enough to merit a Moderate Buy consensus rating. This is based on 10 Buys, 7 Holds and 1 Sell issued over the past 3 months. The average price target clocks in at $105.40, implying shares will be changing hands for ~35% premium in one year’s time. (See AMD stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

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Advanced Micro Devices (AMD) hasn't had a great year, with shares falling 16% since the start of 2021. Should investors be worried about this underwhelming showing? Not according to the semiconductor giant. In fact, going by the company’s latest actions, quite the opposite.

On Wednesday, AMD announced an unprecedented share-repurchase program. Over an unspecified period, the company will buy back $4 billion’s worth of stock - funded in its entirety by cash generated from operations.

And the company is sitting on plenty of it by now. The company saw out 2020 with $2.29 billion of cash in the coffers and short-term investments, the most it has had since 2009.

What’s more, AMD generated free cash flow (FCF) of $777 million in 2020, far above the $276 million the company produced in 2019. Prior to that, since 2011, the company hadn’t reported positive cash flow for a fiscal year.

Looking ahead, Deutsche Bank’s Ross Seymore excepts AMD to generate ~$3-3.5 billion in annual FCF from 2021 to 2023. Over that 3yr period, the $4 billion repurchase plan should represent ~40% of FCF. Seymore also notes that this first large return of cash to shareholders indicates AMD’s “confidence in its ability to continue generating solid free cash flow (FCF) for the foreseeable future.”

“Overall,” the 5-star analyst further said, “We expect the market to view this share repurchase announcement favorably as it illustrates AMD’s confidence in its future prospects despite recently rising investor concerns regarding intensifying competition.”

Mirroring AMD’s confidence, Wells Fargo’s Aaron Rakers thinks the aforementioned intensifying competition is less of a concern to AMD and believes the announcement “likely reflects AMD's confidence on executing on its technology roadmap, as well as it maintains/improves its competitive positioning vs. Intel.”

What does the rest of the Street make of AMD’s prospects? The ratings are a mixed bag, tilting in the bulls’ favor. Based on 9 Buys vs. 7 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. The average price target is more conclusive; at $106.14, the shares are anticipated to appreciate by 37% over the coming months. (See AMD stock analysis on TipRanks)

To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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In today's video, I look at Advanced Micro Devices (NASDAQ: AMD), which just announced a $4 billion share repurchase program. Below I share three reasons why I believe AMD is sitting at attractive levels right now. AMD is growing at impressive levels, and its growth is expected t