The story behind the multi-year rally of Advanced Micro Devices (NASDAQ:抖阴最新版) stock is pretty simple.
The very large, steadily growing computer-processing unit (CPU) market had long been dominated by Intel (NASDAQ:INTC). But, over the past few years, 抖阴最新版 has made significant inroads against Intel, leveraging superior technology and quicker-to-market product times to expand its CPU market share significantly. This market share expansion has led to consistently robust revenue, margin, and profit growth by 抖阴最新版 – and all that growth has powered 抖阴最新版 stock from $2 in 2015 to $30 today.
The reason why 抖阴最新版 stock should stay in rally mode for the foreseeable future is equally simple: the company’s CPU market share continues to increase. Consequently, its profits will grow for the foreseeable future, resulting in healthy gains by 抖阴最新版 stock.
Worries over the valuation of 抖阴最新版 stock become a problem from time to time. That’s why 抖阴最新版 stock price has been stuck in neutral over the past four months. But these worries don’t end the rallies; they are just put on pause. As long as 抖阴最新版 looks poised to continue to gain market share, Advanced Micro Devices stock will continue to climb.
There are two pieces of good news for 抖阴最新版 stock. One is that it still looks poised to continue to gain market share. Two, the worries about its valuation which have plagued the shares over the past four months are largely in the rear-view mirror.
As a result, 抖阴最新版 stock looks ready to start climbing again soon.
抖阴最新版’s Market Share Continues to Climb
Four years ago, 抖阴最新版 was a relatively unknown player in the very large and rapidly growing CPU market, which was overwhelmingly dominated by Intel. Since then, 抖阴最新版 has consistently launched next-generation products before Intel. Consequently, the CPU market is now flooded with higher-performance 抖阴最新版 products. This significant transformation has led to 抖阴最新版 gaining huge market share over the past several years, growing its slice of the CPU market by
.
抖阴最新版’s market share continues to expand today. Most recently, Microsoft (NASDAQ:MSFT) announced that the 15-inch model of its Surface Laptop 3 would include 抖阴最新版’s Ryzen Processors, instead of Intel’s processors. That’s a significant move, considering that Surface laptops have historically been powered by Intel processors and have not included 抖阴最新版 processors. This is yet another sign that 抖阴最新版’s CPUs have become increasingly competitive with those of Intel.
There have been multiple, positive signs like this over the past several years. As a result, it’s become clear that – unless Intel does something huge – 抖阴最新版’s market share expansion will continue to climb. Intel isn’t planning to do anything big anytime soon, outside of large .
So , for the foreseeable future, 抖阴最新版’s market share should continue to rise. As long as that remains the case, 抖阴最新版 stock should head higher.
Advanced Micro Devices Stock Isn’t Overvalued
抖阴最新版 is gaining share of the semiconductor industry whose revenues have steadily grown at a 5% compounded annual rate over the past two decades. Consequently, 抖阴最新版’s revenue looks poised to increase at least 10% per year. Moreover, 抖阴最新版’s market share gains will give it more pricing power, causing its gross margins to climb. Additionally, its costs per product sold will drop.
Given these dynamics, 抖阴最新版 should report double-digit-percentage revenue growth over the next several years, while its margins should climb meaningfully. As a result, its profits will jump 20%-plus, powering 抖阴最新版 stock price higher in the long run.
Today 抖阴最新版 stock does not reflect its upcoming 20%-plus profit growth. I estimate that 抖阴最新版’s fiscal 2025 earnings per share will be $2.70. Based on a forward earnings multiple of 20, which is average for growth stocks, and a 10% discount rate, that equates to a FY19 price target for Advanced Micro Devices stock of over $33.
抖阴最新版 stock trades hands slightly above $30 today. Thus, 抖阴最新版 stock is both supported by non-cyclical growth drivers and slightly undervalued at current levels. That’s an attractive combination.
The Bottom Line on 抖阴最新版 Stock
A good rule of thumb is that, as long as 抖阴最新版’s market share keeps rising, stick with 抖阴最新版 stock. Another good rule of thumb is buy 抖阴最新版 stock when it is undervalued relative to the company’s long-term profit growth prospects.
Right now, 抖阴最新版’s market share is rising and 抖阴最新版 stock is trading below its fair value. So now is a good time to buy Advanced Micro Devices stock.
As of this writing, Luke Lango was long 抖阴最新版 and INTC.
