As an investor, you want to pick companies that will reward you for the years to come. If you’re looking for a stock to add to your portfolio, AMD should be on top of your list.
Hello, everyone! My name is Antoaneta. Today, we’ll talk about another top stock pick for the month of September. First of all, I want to tell you that I’m not a financial adviser and this is just my personal opinion. Check out my other blog such as, “Insurance In The UK“. So, let’s start.
Advanced Micro Devices (AMD) saw its stock soar to an all-time high after the chip-making company posted its second-quarter results. If you’ve been monitoring AMD’s progress over the years, you’ll notice that it has significantly improved in the past six years thanks to its improved profitability and new products.
AMD was founded back in 1969 and went public in 1972. It concentrates on developing central processing units for servers and personal computers as well as graphics processing units for data centers, gaming consoles, and personal computers. The company competes with other well-known chipmakers such as Intel and Nvidia.
CEO Ushers AMD to New Era
AMD’s chief executive officer, Dr. Lisa Su, ushered the chipmaking to a new era when the company started to produce Ryzen PC processors as well as Epyc server chips back in 2017. Under her watch, AMD has also taken some of Intel’s market share in servers and personal computers.
After she took over the helm, the company moved past Intel in producing smaller node-sized CPUs, which have better speed and performance. AMD’s chips at a 7-nanometer scale are already underway while Intel continues to struggle with its chips at a 10-nanometer scale. Intel’s production of its already delayed 7-nanometer processors has been pushed back even further and its expected shipment date is around late 2022 or early 2023. When they roll it out, AMD will be far ahead and will be producing processors at a 3-nanometer scale.
Why Buy AMD Stocks?
Extra Supply Drives Boost In Sales
The chipmaker’s second-quarter revenue reached $3.85 billion, which marks a 99% increase from last year’s figures and a significant improvement from the first quarter’s 93% rate. The company’s Q2 revenue beat the company’s guidance by $150 million. AMD’s CEO Dr. Lisa Su linked the outperformance to the company’s ability to get some extra supply from its partners during the past three months. The surplus in supplies is expected to continue in the second half of this year but the shortage of chip supplies will carry on until 2022.
AMD has raised its outlook for the company’s overall sales growth in 2021. It is expected to increase from the previous guidance of 50% to 60%.
Possible Future Market Gains
AMD now has an excellent lineup of innovative and advanced chips, which is driving its revenue growth. In the second quarter, the chipmaker reported that half of the fastest and newest supercomputers in the world use its EPYC data center CPUs. Alphabet’s Google Cloud also announced that it’s using AMD’s EPYC CPUs while Tesla has chosen AMD hardware for its model S and Model X’s infotainment system. AMD may continue to enjoy more market share gains in the future.
Profitable Firm
The company’s continued growth has also improved its profitability profile. AMD was stuck with a single-digit percentage operating profit margin for years. But in the second quarter of 2021, the chip maker’s operating profit margin was at 22%. It also generated a free cash flow of $888 million.
What do all these figures mean? First, AMD is now capable of investing in itself using the cash that the company generates. AMD already has excess cash that will allow it to shop when the opportunity arises. Take, for example, its recent acquisition of Xilinx, which will help it advance even further than Intel.
As AMD continues its technological advantage over Intel, the company could maintain its excellent growth rate with stronger pricing and through the acquisition of more market share. AMD is a top growth stock that should be on top of your buy list.
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