This is due to the potential for more market share gains, as AMD's current market share is still rather small, and also due to the world's increasing hunger for all kinds of semiconductors, showcased by the current global chip shortage. Add in some further improvements in AMD's margins, and net profits could grow considerably more than 100% over the next five years, and profit growth should remain attractive during the second half of the 2020s as well, I believe. This is less than AMD's growth in recent years, but still quite attractive. Over a five-year period, this would equate to revenue growth of around 70%-100%. Add in some market share gains, and AMD could very well be able to grow its revenue by 12%-15% in this segment. The data center market, for example, is forecasted to grow by 10% a year through 2025. But the company will see compelling business growth nevertheless, I believe. AMD will thus, in all likelihood, not triple its revenue again over the next five years.
Maintaining exceptionally high growth rates forever is not possible, as growth inevitably slows down once a company gets larger. Operating margins, meanwhile, went from negative to positive thanks to the impact of gross margin expansion and tailwinds from operating leverage. Gross margins rose thanks to an improving portfolio mix with more higher-value products such as data center chips being sold. AMD has delivered sizeable business growth in recent years, on the back of a combination of market share gains and overall market growth, as global chip demand continues to grow rapidly.ĪMD was able to grow its revenues by around 200% over the last five years while growing its margins significantly as well. Two things should be considered here - the company's growth outlook, and its valuation. Investors shouldn't expect another 1,000%+ price gain over the next five years from AMD, or anything close to that, but thanks to the fact that underlying growth remains intact, AMD stock should eventually start to rise again - although at a more moderate pace compared to the last couple of years. These stocks had all benefitted from multiple expansion during their upwards runs, and they are now consolidating while it seems like the market wants to wait for their business growth to merit more share price gains. This underperformance over the last couple of months went hand in hand with a similar underperformance that can be seen in many other high-growth market darlings from 2020 and before, such as Tesla ( TSLA), Netflix ( NFLX), or Zoom Video ( ZM). Over the last six months, AMD is down 13%, while the broad market gained 15%. In the more recent past, however, the performance has been less stellar: AMD does not pay any dividends, but massive price increases over the last five years have nevertheless made AMD a great investment for those that entered positions a couple of years ago - over the last five years, AMD rose by a massive 1,700%. Those that bought AMD a couple of years ago have gotten used to a very strong performance from their investment, not only when it comes to AMD's operational progress, but also when it comes to share price gains. AMD should be able to grow its profits at an attractive pace in the coming years, but equity price gains may be less pronounced, as rapid ongoing growth is already priced in at current valuations. The stock has, over the last couple of years, performed quite well, although shares have been moving sideways for the last couple of months.
( NASDAQ: AMD) is a fast-growing semiconductor company that is gaining share in attractive markets such as data centers. JHVEPhoto/iStock Editorial via Getty Images Article ThesisĪdvanced Micro Devices, Inc.
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