In hindsight, investors can see a clear before-and-after picture with Advanced Micro Devices (NASDAQ:AMD) stock. Prior to the onset of the novel coronavirus, the company and its shares were seemingly unstoppable.
The pandemic proved that nothing is unstoppable as even AMD stock had to take a breather. Still, a strong fiscal profile and perhaps the most powerful processors in the industry have kept this semiconductor manufacturer in a leadership position.
These factors should move the share price back to its previous peak, so patient investors can take a position today with confidence.
Accelerated Growth
If we rewind to late January, investors would have seen a company in hyper-growth mode. The broader tech sector was doing reasonably well, but AMD’s fourth-quarter earnings results provided plenty of hope fuel to the fire for fans of the company.
One outstanding tidbit from that earnings report was AMD’s sales in the computing and graphics division. Year-over-year, the company showed a whopping 69% increase in this area. Much of this was driven by sales of AMD’s Radeon gaming GPU and Ryzen CPU products, as the company had increased the average per-unit selling prices of these components.
That’s all very impressive, but it gets even better. Check out these other stats from AMD’s fourth-quarter 2019 results, with comparisons to the previous year’s comparable quarter numbers:
- $2.13 billion in revenues, 50% higher than $1.42 billion a year earlier
- $0.32 in adjusted earnings per share (diluted), 300% more than just $0.08 per share in the prior year
- $170 million in GAAP net income, an astounding 347% higher than $38 million the previous year
Given the pace of the company’s sales and income acceleration, CEO Lisa Su was fully justified in her confident outlook:
“I’m quite encouraged actually by the strength of the pipeline that we see, the number of customers that are engaged, and… how they’re deploying. So, I think we’re going at a good pace, and we’ll continue to accelerate that as we go through 2020.”
Shifting to the Cloud
The spread of the pandemic could not be foreseen, so there’s no point in criticizing Su’s confident outlook in early 2020. Given the data she had at that time, there was no reason to believe that the global economy would experience such a sharp contraction.
Investors must factor in the major shifts in the tech space that have arisen in the wake of the pandemic. One potential shift could be a faster move into the cloud, which was already in progress even before the coronavirus outbreak.
A survey of 50 chief information officers conducted by brokerage firm Instinet found that while 68% of them expect that they will reduce funding for PC’s, 68% of them stated that cloud services will become more of a priority. Given this data, Instinet’s conclusion makes perfect sense:
“The data suggests a pivot to cloud, and perhaps, more public cloud… CIOs expect to reduce their mix of on-prem workloads from 59% in 2019 to 35% in 2021… We have theorized the crisis could accelerate the cloud migration… We expect firms with public cloud exposure will emerge stronger from the crisis.”
This shift positions AMD well for a post-pandemic, cloud-driven future. The company’s power-packed Radeon GPUs are specially designed for cloud gaming, while AMD’s EPYC Server Processors remain a top choice among cloud-service providers.
The Final Word on AMD Stock
Accelerated growth and a smooth pivot to the cloud make AMD an easy choice among semiconductor-sector leaders. And if the coronavirus crisis took AMD stock down a few notches, that’s an opportunity to own the company’s shares at a great price.
Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
