Advanced Micro Devices

NASDAQ: (AMD)
We Recommend: BUY
Stock Price: $12.24
Target Price: $19.06
Market Cap: 11.49B
Average Daily Volume: 53.6M
Investment Thesis
AMD has made significant changes in its product
line up to be able to better compete with INTEL and
NVIDIA. The market for graphic processors is
expanding rapidly especially in the area of
blockchain technology.
■ This will result in faster sales growth
■ New product pricing allows for stronger
margins
Business Model
● AMD is a global semiconductor company that
manufactures computer chips for sale to:
○ Original Equipment Manufacturers (OEM)
○ Directly to commercial/industrial clients
○ Through wholesale distribution network
to consumers
-Three key markets such as PC, immersive
devices, and data center.
About Advanced Micro Devices

■ Founded in 1969
■ Headquartered in Santa Clara, CA
■ Publicly listed on NASDAQ in September 1971
■ Develops computer processors and related technologies
for business and consumer markets
Competition

Intel Corp (for CPUs)

Nvidia Corp (for GPUs)

About CEO

Lisa Su
■ She joined the company in 2012 as Senior Vice President
and appointed to CEO of AMD in October 2014
■ Ensure that the brightest engineering mind called AMD
home are focus on developing high performance
graphics and technologies that will change the world.
■ AMD reported a 19% increase in revenue, includes sales
of EPYC chip for servers, stock price jumped by 11% in
trading.
Computing and Graphics Segment

■ Processors (CPU) & Graphics

Processors (GPU) for use in consumer
PC’s or sold separately
■ Commercial models, particularly
GPUs, for use in large-scale
computing
CPU Product Highlight: Ryzen Line

■ The 2nd gen of

Ryzen will release
in April
■ AMD will compete
with Intel’s chips
on performance
and price
GPU Product Highlight: Radeon Instinct Line

■ Allows AMD access

to growing
markets such as
Machine
Intelligence and
Deep Learning
GPU Product Highlight: Radeon Line

■ Competes in PC
gaming market
■ The card of choice
for Crypto mining,
taking market
share from Nvidia
last year
GPU Market Share

AMD increased its shipment

market share by 6.5% in Q4’17
from Nvidia
Enterprise, Embedded, and Semi-Custom Segment

■ Server processors
■ embedded processors
■ Ex. digital signage, medical imaging, casino
game machines
■ Semi-custom SoC products
■ Ex. special combined cpu/gpu chips for both
Xbox One and Playstation 4
Server (CPU) Product Highlight: EPYC Line

■ The new EPYC line

will allow AMD to
take market share
from Intel by
competing on
price and
performance
Supply Chain
Porter’s five forces

1. Industry rivalry: High

2. Threats of new entrants: Low
3. Supplier bargaining power: Low
4. Buyer bargaining power: Low
5. Threat of substitutes: Medium
 2015 2016 2017 2018 2019

Revenues 3,991.0 4,272.0 5,329.0 6,302.1 6,807.1

Gross Margin 1,080.0 998.0 1,823.0 2,301.5 2,569.4

Gross Margin (%) 27.6% 31.4% 34.3% 36.5% 37.8%

Opex 1,561.0 1,370.0 1,619.0 1780.9 1869.95

Net income -660.0 -497.0 43.0 332.3 533.7

EPS -0.84 -0.60 0.04 0.32 0.50

AMD Free Cash Flow and EBITDA

2015 2016 2017 2018 2019

Free Cash Flow -322.0 13.0 -45.0 383.1 512.6

EBITDA -314.0 -239.0 348.0 752.0 965.0

EBITDA as % of sales -8% -6% 7% 12% 14%

Credit Analysis

Moody’s Credit Rating:

B2
Risks

■ Margin expansion may not occur as

expected based on competitor price
actions
■ Product improvements may not work
as expected
■ Innovative products from
competitors
Additional Risks

■ Spectre
■ Security breach
Valuation

■ EV/Sales
■ Current price:$12.24
■ Target price:$19.06
Reasons to BUY:
1. Cryptocurrency Position
2. Consumer Demand
(Gaming)
3. Server Market Entry
 Questions?
*Disclosure: I/We are long on AMD