Advanced Micro Devices, Inc. (AMD) is a leading maker of integrated circuits. AMD produces microprocessors for desktop PCs, portable computers, and servers. It also manufactures graphics processors and circuits for communications equipment. This week, I fundamentally analyze AMD’s stock. I review AMD’s operating segments, key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, look at expected rate of return from this investment, and go over the potential merger arbitrage opportunity available with this stock. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Earnings per Share, Book Value, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc. I also compare the AMD’s current valuation to that of S&P 500.
After taking into account 2020 free cash flow of $777 million figure, a 15% growth rate of FCF (growth for the next 10 years), 13% discount rate, 8% long term growth rate (growth from 10 year mark to perpetuity), 1,207 million shares outstanding, and $330 million of long term debt, the DCF analysis yields us an intrinsic value of $23.69 per share. If we decrease the discount rate from 13% to 9%, the intrinsic value of AMD stock comes to $113.82 per share. Using the current stock price of about $93.77 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return of 0.3% if we hold this security through 2060.
Timestamp
0:00 Introduction
0:36 Operating Segments
3:16 Key Ratios Analysis
13:29 Discounted Cash Flow Analysis / Intrinsic Value
16:05 Expected Rate of Return Calculation
17:07 Xilinx Merger / Arbitrage Opportunity
19:06 Summary / Conclusion
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References:
AMD’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Advanced Micro Devices, Inc. is an American multinational semiconductor company based in Santa Clara, California, that develops computer processors and related technologies for business and consumer markets.
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