AMD didn't have the greatest 2024 down 7% right now trading at its 52 week low although we do get the analysts Seeking Alpha and Wall Street giving this a buy so let's find out deep dive is this a bargain buy right now for long-term future gains and we do have to point out that last year many semiconductors like Nvidia like Broadcom were up in fact triple digits AMD alongside Intel one of the few that were actually down. Now as a side note we do want to point out that the CEO Lisa Su in fact was awarded the CEO of the Year award. Whether or not that is deserved something just to point out.
But looking to 2025 and some very bullish news it starts off last week with Microsoft saying they expect to spend around 80 billion. on AI-enabled data centers. And actually, interestingly, not too long ago at a conference, the CEO did talk about how the addressable market for data centers, AI accelerators, are going to grow from $45 billion to $500 billion in 2028. And we are talking about a 60% compounded annual growth rate.
Now, if we actually take a look at AMD's latest earnings, not only looking very good in terms of their revenue, which was up from $5.8 billion from the same quarter last year to 6.8 billion. But the main key driver of this growth actually came from the data centers, where it was up triple digits, 122%. Now, that is very bullish for AMD, as well as data centers, the total addressable market, as they did stay up 60% on a compounded annual growth rate. But one thing we do have to point out, the leader in this market is, as I'm sure you're aware, Nvidia, where they have seen some astronomical growth just over the most recent period.
Now we can also see although a little bit outdated the way that the market share has been moving with Nvidia around 2021 they were sitting at 27% just over the last year this has increased to 75% and the trend that you probably have noticed is that Intel has been decreasing over the longer term Nvidia has been increasing whilst AMD itself has been pretty much yo-yoing from the single digit to the low double digit and that is one area where they do need to continue to increase so that they can start to get a lot more market share than the nine percent they currently sit on now the other parts of their earnings were very impressive we got to see efficiencies in their margins gross margin up on a both gap and non-gap basis we also got to see their operating incomes up as we can see quite significantly whichever way you look at it and their eps which is what many investors do look at alongside the revenue also showing some very large signs of impressive growth. We do, however, want to point out from an article last week that Amazon said they aren't seeing enough demand for AMD's AI chips to offer them via the cloud. And that is something we need to consider with AI. Is this something that is going to be as large as all the analysts are telling us? Or are we actually in for a rude awakening?
And are we going to see some of these companies with very extreme valuations come down even further? Now, what we do, in fact... want to point out here is that while AWS and AMD are still close partners the sale of their products is always under consideration. Now not necessarily a bearish thing just something we want to point out alongside something that could be considered bearish not something we agree with but again in fact the stock did come down a few percentage on the news last month that Bank of America actually downgraded AMD due to potential market share losses that they do envision moving forward.
How much of a drop? Well actually they brought their target now to $155 from the $180 and they talk about the higher competitive risks in AI and essentially comparing it to the best of breed Nvidia's dominance which as we did show you earlier was very very large and whilst we also just mentioned about Amazon we can in fact see it also mentions that in this article that Amazon in fact have a preference for an alternative custom so There is a lot to consider with this company. We will go back to it just to also highlight here that whilst it is down around 7% over the last year, if you've been a longer-term shelter, you would be up more than 4,600%, which would massively outform the S&P 500. Now, we do want to flag here their earnings moving forwards, and it does look particularly good in terms of the next four quarters.
Each one of them, they are anticipating double-digit growth to the EPS on a year-on-year perspective. And out of the last four quarters, at a... bare minimum they have been in line with a few of them a marginal beat.
Now what is their forward PE as we can in fact see here their December 2025 $5.10 earnings per share estimate does make the forward PE sit right now around 24.6 which is in fact lower than the S&P 500. and we will show you shortly the comparison against the sector median as well. In terms of the underlying metrics, well firstly free cash flow per share, ideally consistent increases over the longer term, but do understand semiconductor space is highly cyclical and we do also notice this comes through the numbers. In fact from 2021 it has come down the subsequent two years.
Nice to report though over the next 12 months we are expecting a large jump to just under $4. In terms of sales growth, again, cyclicality coming right through the numbers. They had a great period from 2020 to 2022. 2023, a drop of negative 4% to the top line. And based on the trading 12 month, we are expecting 2024 to be relatively decent. Now, again, it's not fair to compare this company to Nvidia, which has had massive growth because we also see that reflected in the overall market share.
But ideally, we want to see step-by-step AMD start to take more of that data center growth. And in most recent period, we did see a large triple digit growth on a year on year basis. Total sales also looking good when you do zoom out, pretty much quadrupled their top line over the last 10 years. And whilst we don't like to see companies do this, which in essence is diluting the shareholder, we can see they've issued quite a lot of shares over the longer period. What we would say here, you probably really wouldn't care given that over the last 10 years, they have massively, massively outperformed the S&P 500. ROIC again cyclicality shining right through ideally minimum 10% to give us faith management are able to effectively allocate their capital unfortunately only 1% in 2023 2% on a trading 12 month and this is why as we will come to our DCF model to get to our own valuation we will incorporate a margin of safety operating margin as well as free cash flow both showing very inconsistent numbers 6% on a trading 12 month ideally we do want to see a minimum of 16 and free cash flow whilst it is around the minimum 5% in 2023, ideally we do want to see it a lot higher.
So these are different things that we do need to consider when factoring our overall investment thesis. Net debt to EBITDA, what we love about this, bearing in mind these numbers show us the number of years it would take the company to pay off all of their debt net of cash on hand and correlates to the balance sheet strength. We have zero from 2019, indicating it won't even take this company one day to pay off all of their debt. And we will highlight and reinforce this when we do a quick run through their overall balance sheet.
Now, we do want to let you know we have released our latest free weekly article, where we drop one every single Monday morning to your inbox, covering severely undervalued stocks, as well as what's gone on in the market over the last few days. So click below, you can sign up, start reading straight away, where you'll be able to gain access to 46 undervalued stocks for the month of January. Lots of information for each one, the upside that Wall Street themselves see over the next year, And on top of that, you can grab a copy of 29 stocks that Wall Street themselves believe have the most upside right now in the S&P 500. So click below. You can sign up and start reading straight away. We then look at insider ownership that sits at 0.73%, around 96 million worth of sales over the last year.
And what we do, in fact, want to point out, though, in 2025, there has been no movement. In Q4, that is where we get around 28 million worth. And for those that want to see full transparency here, both insider selling and some buying, what we in fact notice on the 4th of December, the CEO herself sold just under 77,000 shares, netting her under $11 million.
Now remember what we say, insider selling, not typically a bearish signal. They do sell for many reasons, personal and financial, but the information is there if you want it for your own thesis. Institutional ownership, well, 71%, around 10 billion worth of sales over the last year. During the same time frame, pretty much double the amount of buys.
And when we do look at Q4, we do notice more selling than buying. Yet overall, over the last 12 months, institutions have been a lot more bullish. Remember, though, never copy what insiders or what the institutions do.
Always, always do your own due diligence. Now, we've already covered their top line revenue. As we said, over the last 10 years, it is pretty much quadrupled to 2023. And based on the trading 12 month, we do anticipate, as mentioned, around 10% growth. into 2024. What we ideally want to show you here is what is the story told on the bottom line net income and we can see in fact very inconsistent a loss of 403 million reported in 2014, 854 million profit in 2023 but that is lower than both of the last two months in fact a bit of a downward trend reinforcing that cyclicality but on a positive note we are expecting a large jump to 1.8 billion based on the trailing 12 month.
In terms of looking at the balance sheet, as always, a quick health check, total cash versus total debt. Cash itself is up 1 billion in 2014 to 4.5, but don't forget in isolation, one of these numbers won't tell us anything. So when we compare it to their total debt numerically and directionally, pretty much stayed flat around 2.2 in 2014 and the same to be said in the latest quarter.
So nice to see cash has increased four and a half fold whilst it has remained relatively flat. And as we already mentioned earlier on, it won't take this company one day to pay off all of their debt, net of cash on hand. We also want to show you the cash this company does generate from their operations.
And whilst they were burning cash in 2014, 98 million worth, right now on a trading to a month they are sitting over 2 billion which is a very good sign so let's jump into some of the gradings the first one valuation now they do get a d plus bear in mind we would say this should actually be based on the 2025 figure sitting around 25 as we showed you earlier so we actually believe this is trading right now around the sector median but the information is here depending on which valuation metric you do want to incorporate yourself and then we take a look at the growth grade where they get an a revenue year on year 10 better than the four and a half of the sector. In terms of forward looking, 11 versus the sector 5.6 and one thing we love to see here, A plus 42% growth anticipated on a compounded annual growth rate to the earnings per share when in comparison the sector median sits at 15.5. We then move on to the profitability where they get a B plus.
Now 52% gross margin versus the sector at 51, so not far off. But the bottom line does look good, 7.5 versus 3.8. But one of the main strong points here is the cash generated from operations, 2.1 billion versus the sector comparative at 97 million. So quick wrap up for this part of the analysis, double buy from Seeking Alpha and Wall Street, D plus on valuation, although we don't particularly agree, A on growth with a B plus on profitability. Now let's quickly jump into the comparison against others in the semi space of a relatively similar size.
Now total return when we do look over the last year, and as highlighted at the beginning of the episode, negative 7%. When we zoom out over the last five years, they aren't doing too bad, up 158%, actually outformed the S&P during that period. But when we zoom out even further, the best performing from this bunch, up 4,667%. But do not forget, past performance is not an indicator of the future. They could perform a lot worse, same time they could perform a lot better.
We also just want to highlight the comparative against the S&P. Now, no surprises, S&P outformed over the last year, but over both the last five and the last 10 years, pretty clearly the S&P underperformed. AMD very, very strong.
The only thing we would say, we do just show this to consider whether you want to look at a low cost ETF that tracks the S&P or perhaps a semiconductor ETF like SoxQ or SMH. Now, let's jump into the valuation model. Now, our intrinsic value, $189, is derived from the DCF model.
Now we have here the free cash flow year on year. Average growth rate, negative 280. It is skewed. We have years going from positive to negative. Now based on that, with the discount rate, we get the present value of future free cash flows and terminal value.
Add together with the cash, subtract total debt, get to the equity value, divide by the shares outstanding. And as we can see here, 189, which does indicate 51% upside. Now remember, you can grab a copy of this model by clicking on the pinned comment below. running through your own numbers, whether it's for AMD or any others, as these numbers, as mentioned, are subjective.
Full transparency, though, we will show you at the 35% rate for those that are a lot more bullish, $250, which is pretty much double the current price. So if you do believe their free cash flows can grow at that rate, in fact, we saw data centers anticipated to grow even higher, then that is pretty much a double from this point. For those that are actually a lot more conservative, at 25%, $142, that is still upside of $13.
I mean, And as we've talked about before, Bloomberg themselves actually talked about this market from 2023 growing at a 42% rate. If we were to incorporate that into the numbers, then the price would be $365. That is pretty much three times the current price, near 200% upside. Now, we are going to run this through the median rate of 30%, where as always on this channel, we do incorporate a 10% margin of safety. We execute on that if it meets our three golden criteria, wide moat, strong financial metrics.
and good forward-looking data. If you believe that in today's episode, a buy at $170, then we keep going till it's near the current trading price. And as we can already see, there is a large margin of safety with advanced micro devices, 35% if you can buy it around the $123 mark. As we already saw, a double buy rating from both Seeking Alpha as well as Wall Street, and they have a price target of $185, upside of 48%.
Although, as we have seen, analysts have many different targets. Bank of America, in fact, we highlighted in today's episode, did downgrade it to 155. Now, overall, with AMD, they have experienced significant growth in recent years, driven by advancements in AI data. data center technologies and under the CEO's leadership their share price actually rose from $3 to around the $125 which has now surpassed the market value of Intel.
In fact we showed earlier the market share has been decreasing quite significantly. The only thing we would say with this company they do face challenges particularly in the AI graphics processing unit where Nvidia again highlighted earlier does hold a dominant position and analysts not just Bank of America but but others have also talked about their ability to increase their market share in the sector, and that is one of the main reasons, if not the only reason, why they downgraded to $155. On the flip side, despite these challenges, some analysts remain optimistic about their prospects. We had Rosenblatt analysts, in fact, identify AMD as a top pick for 2025, and they cited the expanding market share, AI potential, and actually themselves had maintained a buy rating with a price target of $250.
We would also say that investors should consider broader market trends, potential risks, including competition from the industry leaders, like Nvidia, potential downturns as well in the PC market, and geopolitical factors that could impact AMD's operations. As always though, do give us your thoughts in the comments below. Is this one you are looking to buy around a 35% MOS, 48% upside, or in fact, maybe you are looking at semiconductor ETFs, or for whatever reason, this doesn't just fit your overall investment portfolio. Give us your thoughts below. Don't forget to sign up to the free weekly newsletter.
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