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AMD Hits a New 52-Week High, Sees a Powerful Start to 2020

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Shares of Advanced Micro Devices (AMD - Free Report) rallied to an all-time high of $49.25 on Jan 2, closing marginally lower at $49.10. Notably, the company has a market capital of $51.07 billion.

The company’s shares have skyrocketed 158.4% in the past year, outperforming industry’s growth of 59.7%. Meanwhile, the S&P 500 index has rallied 29% in the same timeframe.

The momentum can be attributed to robust adoption of the company’s EPYC server and embedded processors, and Ryzen desktop and mobile processors.

Price Performance




Additionally, robust demand of AMD’s GPUs especially Radeon processors has been a key catalyst.

Moreover, notable customer wins on the back of its high-performance portfolio of processors and continued innovation in high performance computing (HPC) ecosystem has been a major growth driver.

Noteworthy Deal Wins: A Key Catalyst Through 2020

Ongoing production ramp of 7nm technologies is likely to provide AMD a competitive edge against Intel (INTC - Free Report) .

Growing clout of Ryzen 3000 and Ryzen 2000 desktop processor families across leading retailers and e-tailors, hold promise. Notably, Ryzen PRO 3000 Series processors have been implemented in latest HP and Lenovo devices, which in turn is expected to help AMD in expanding presence in the commercial market.

Moreover, introduction of mainstream desktop processor featuring 16-cores and third-generation Ryzen Threadripper processor family, to power high-end desktops and content creation applications, is expected to drive the top line in 2020.

Further, as Sony and Microsoft roll out new AMD-powered consoles (most likely in holiday of 2020), revenues from Semi Custom vertical are expected to improve.

Solid EYPC Adoption Instills Confidence

Second generation of EPYC processors (code-named Rome and built on its Zen 2 microarchitecture) are already witnessing adoption among notable companies including Google, Twitter (TWTR - Free Report) , Cray, HPE, Dell Technologies and Lenovo.

Server revenues are anticipated to improve through 2020, owing to ongoing momentum of the company’s latest second-generation EPYC processors.
 

For instance, Google is looking forward to deploy EYPC processors to enhance data center environment and strengthen Google Cloud Platform. Moreover, Amazon’s Amazon Web Services, Microsoft Azure, IBM Cloud, Tencent, OVH Cloud, among others, intend to utilize EPYC processors to enhance their respective data center architecture.

In enterprise domain, Lenovo Dell, and HPE have rolled out new platforms based on latest EPYC processors. Considering HPC vertical, U.S. Department of Defense intends to utilize AMD’s processors to power three distinct supercomputers.

Higher GPU Sales to Boost Top Line

Strength in GPU ASP, primarily driven by higher channel GPU sales, is expected to strengthen the company’s competitive position against NVIDIA in the discrete GPU market, and improve margins.

Notably, the Zacks Consensus Estimate for 2020 earnings is pegged at $1.09 per share, indicating growth of 76.5% from the year-ago quarter.

The company has also rolled out Radeon RX 5500 GPU, in a bid to provide mainstream gamers with an enhanced gaming experience. Notably, Lenovo, Acer, HP, and MSI are set to utilize the latest GPU in their respective upcoming PCs.

Abundant Growth Prospects

Robust demand for memory chips and other semiconductor solutions, courtesy of rapid adoption of cloud computing, AI, IoT, autonomous cars, advanced driver assisted systems, gaming, wearables, drones and VR/AR devices, is a major growth driver.

Per World Semiconductor Trade Statistics, global semiconductor sales are expected to increase 5.9% in 2020 against an estimated decline of 12.8% in 2019.

The accelerated deployment of 5G technology — the next-generation wireless revolution — is also likely to spur growth.

Zacks Rank and Key Pick

Currently, AMD carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector trading at 52-week high is Apple (AAPL - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Apple is currently pegged at 10.5%.

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