AMD Stock: Is Advanced Micro Devices a good investment after record Q2?

Advanced Micro Devices Inc. (NASDAQ: AMD) is probably the fastest-growing semiconductor company, consistently expanding its market share. The chipmaker’s continued focus on enterprise business, especially the rapidly-growing data center segment, has enabled it to stay broadly resilient to macroeconomic headwinds.

AMD’s aggressive growth initiatives have forced others including its bigger rival Intel Corp. (NASDAQ: INTC) to ramp up their portfolios with competitive products. Taking advantage of its innovative product offerings, the company has outshined Intel this year both in terms of stock performance and on the earnings front.

A Wise Bet?

AMD is one of the safest stocks that has a good track record of returning value to shareholders. The stock shrugged off the recent weakness and seems to be headed for a rebound. It has received a few rating upgrades lately and is expected to grow in double-digits through mid-2023. Overall, the positive outlook and favorable valuation offer a unique buying opportunity that is worth trying.

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Advanced Micro Devices Q2 2022 Earnings Call Transcript

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The company owes the strong growth momentum to its diversified business model and continued expansion of product portfolio. The uptrend is expected to continue in the latter half of the year, catalyzed by the roll-out of next-generation 5 nm products. The gaming division, which includes the graphic cards and game console products, and the company’s embedded products are also doing exceptionally well.

Bullish View

It is expected that efficient execution of technology and product roadmaps, supported by strategic investments across the business, would allow the tech firm to take growth to the next phase and achieve long-term targets. However, muted demand in the PC market could be a dampener as far as the near-term performance of the consumer segment is concerned. Another factor that could partially offset the positive momentum is the slowdown in China.

From AMD’s Q2 2022 earnings conference call:

“Despite the current macroeconomic environment, we see continued growth in the back half of the year, highlighted by our next-generation 5-nanometer product shipments and supported by our diversified business model. We remain laser-focused on executing our product and technology roadmaps, further deepening our customer relationships and investing strategically across the company to drive our next phase of growth across the $300 billion high-performance and adaptive computing market.”

Record Revenue

Interestingly, AMD’s bottom line either matched or beat estimates in every quarter in the past six years. Revenues grew progressively during that period and reached an all-time high in the second quarter, after setting new records in each of the trailing seven quarters. All the reporting segments — which the management reorganized recently — grew sharply in the second quarter, driving up total revenues to $6.55 billion. That translated into a 67% growth in adjusted earnings to $1.05 per share.

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Micron Technology Q3 Earnings: Key financials and quarterly highlights

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On the other hand, Intel experienced significant weakness in its main business segments in the June quarter, resulting in a double-digit fall in both revenues and earnings. The dismal outcome did not go well with investors and the stock suffered. The management expects third-quarter profit and sales to come in below the prior-year levels.

AMD recovered from the lows and once again traded above the $100-mark this week, with most of the gains coming after the earnings announcement. In the past 30 days, the shares gained about 38%.