Breakdown: Why AMD Shares Grew Nearly 2000% In Five Years, And What Are Their Prospects
In January 2015, processor manufacturer AMD was given $ 2.69 per share. In July 2020, securities rose to $ 55.04 per share – an increase in five years was almost 2000%. What helped the company reverse an unfortunate trend and regain lost market positions, and what will happen to its shares next? Let’s figure it out in our new article.
A bit of history
AMD (Advanced Micro Devices) was founded in 1969. Today it manufactures CPUs and GPUs for PCs and servers. In addition, the company is involved in projects in the areas of machine learning, artificial intelligence and blockchain.
At the same time, for more than 10 years the company itself has not been engaged in production, but places orders at the facilities of other companies. None of the main competitors, including Nvidia, Intel and others, have such a business model.
A decade ago, AMD’s share of the server chip market was as high as 20%. However, the company was unable to release a new generation of chips on time and lost the competition to Intel. As a result, in a few years, Advanced Micro Devices’ market share dropped to 1%.
How AMD turned the tide
The situation began to change with the change of the company’s CEO. In October 2014, Lisa Su took over this post. Under her, the company was able to master the 7nm technical process and launched a line of 7nm server chips. This was a real breakthrough – at the time of the appearance of such processors from AMD, Intel was still releasing 14-nanometer chips and was only planning a transition to 10 nm.
In addition, AMD managed to reduce the cost of production, as a result of which its products turned out to be cheaper than competing chips. This helped attract large customers, including Amazon, Google and Microsoft.
In addition to its own successes, the company was helped by the problems of its main competitors from Intel. The company ran into production problems and was unable to ship enough processors.
As a result, by 2019, AMD’s share of the server chip market was already 8%, and according to forecasts, in 2020 it should be 10%.
At the moment, AMD continues to actively develop and release new products to the market. So, in June 2020, AMD released an updated series of third-generation Ryzen processors for PCs. In addition, Ryzen 4000 series CPUs, built on the new Zen 3 architecture, are expected to hit the market before the end of the year.
The company’s financial indicators are also growing. In the first quarter of 2020, AMD’s revenue exceeded revenues for the same period last year by 40% and amounted to $ 1.79 billion. This result exceeded the expectations of experts. Also, the net profit increased 10 times – an increase to $ 162 million.
At the same time, there are also moments limiting the growth of AMD shares:
- The company does not pay dividends – the main competitors from Intel pay them every four years (yield 2.3%).
- There are signs of overvalued AMD stock – Many analysts are convinced that the company’s securities are now even more expensive than they should, based on business indicators.
- The marginality is worse than that of competitors… In the first quarter, AMD’s gross margin was 46% (how much money is left of total revenue after deducting production costs). Intel’s score is over 60%.
This does not stop the company’s management, analysts and investors from waiting for further growth. So, according to forecasts, in the second quarter of 2020, sales will amount to $ 1.85 billion, which is 21% more than in the same period last year. And quarter-on-quarter growth will be 4%.
In Russia, shares of American companies, including AMD and their competitors from Intel, can be bought at St. Petersburg Stock Exchange… To do this, you do not need to open an account with a foreign broker, a Russian account will be enough. Open it can be online…
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