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The Zacks Analyst Blog Highlights: Advanced Micro Devices, Intel, Cisco, Hewlett Packard Enterprise and NVIDIA
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For Immediate Release
Chicago, IL – September 20, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Advanced Micro Devices (AMD - Free Report) , Intel (INTC - Free Report) , Cisco (CSCO - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) and NVIDIA (NVDA - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Is There More Upside in AMD Stock?
Advanced Micro Devices shares are shaping up to be one of the top gainers this year with a year-to-date return of over 210%.
Most of this success story is based on its rivalry with Intel, a company it seems to be beating with its new product lineup not only in the desktop but also in the server segment (that Intel has dominated for long) and mobile.
The truth is, Intel’s yield issues and consequent squandering of its process lead have opened the door to increased competition, particularly for AMD (the other x86 player that has seen a bout of increased innovation at around the same time). Moreover, the vacant CEO position is not helping things at Intel.
Intel’s former CEO said that the company was trying to contain server market share loss to AMD at under 15-20%. AMD CEO Lisa Su has said on earnings calls that the company is targeting mid-single-digit server unit share by the end of 2018 on the strength of its EPYC family. AMD counts Cisco AND Hewlett Packard Enterprise as customers.
The company is even more optimistic about the desktop market where it is targeting 20% market share this year and 40% in 2019, driven by its Ryzen chips.
Market share is a function of not just the technology but also the process. AMD is splitting production between Globalfoundries and Taiwan Semiconductor for the 7nm designs.
Su has expressed satisfaction about the foundries’ ability to deliver the volumes required to pick up additional market share. But the decision to move over some production to TSMC, which is further along with the transition to smaller geometries could mean that Globalfoundries is lagging behind (the company has changed CEOs a number of times in the last few months). It could also mean that the company is simply preparing for higher volumes.
Whatever be the case, if successful, the increased volumes will greatly boost profitability at AMD, since the newer products will have higher ASPs and therefore generate higher margins.
AMD also battles NVIDIA in discrete graphics where it gained significant market share in the first quarter before relinquishing those gains in the second as some price competition played out, according to Jon Peddie Research. Both companies have new products lined up for the fourth quarter build season and there’s nothing to suggest any deterioration in AMD’s market share of around 30% (NVIDIA owns the rest of the market).
Semiconductor product cycles are long, so AMD is likely to hold its gains in the near to midterm and Intel will have to try really hard to contain it if it can. This is likely why analyst estimates for AMD are soaring. The following chart shows that the earnings estimate for the current fiscal year is up 63.6% over the past year-
This looks more than priced-in, however-
AMD’s PEG of 4.51X is high, both with respect to the historical period when it has varied between 7.43X and 3.35X with a median value of 4.40X and the S&P 500 PEG of 1.78X.
It also isn’t attractive on the basis of sales. The current P/S (TTM) of 5.72X recently shot past the S&P 500’s 3.48X and is close to its 6-month high of 5.86X.
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Advanced Micro Devices, Intel, Cisco, Hewlett Packard Enterprise and NVIDIA
For Immediate Release
Chicago, IL – September 20, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Advanced Micro Devices (AMD - Free Report) , Intel (INTC - Free Report) , Cisco (CSCO - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) and NVIDIA (NVDA - Free Report) .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday’s Analyst Blog:
Is There More Upside in AMD Stock?
Advanced Micro Devices shares are shaping up to be one of the top gainers this year with a year-to-date return of over 210%.
Most of this success story is based on its rivalry with Intel, a company it seems to be beating with its new product lineup not only in the desktop but also in the server segment (that Intel has dominated for long) and mobile.
The truth is, Intel’s yield issues and consequent squandering of its process lead have opened the door to increased competition, particularly for AMD (the other x86 player that has seen a bout of increased innovation at around the same time). Moreover, the vacant CEO position is not helping things at Intel.
Intel’s former CEO said that the company was trying to contain server market share loss to AMD at under 15-20%. AMD CEO Lisa Su has said on earnings calls that the company is targeting mid-single-digit server unit share by the end of 2018 on the strength of its EPYC family. AMD counts Cisco AND Hewlett Packard Enterprise as customers.
The company is even more optimistic about the desktop market where it is targeting 20% market share this year and 40% in 2019, driven by its Ryzen chips.
Market share is a function of not just the technology but also the process. AMD is splitting production between Globalfoundries and Taiwan Semiconductor for the 7nm designs.
Su has expressed satisfaction about the foundries’ ability to deliver the volumes required to pick up additional market share. But the decision to move over some production to TSMC, which is further along with the transition to smaller geometries could mean that Globalfoundries is lagging behind (the company has changed CEOs a number of times in the last few months). It could also mean that the company is simply preparing for higher volumes.
Whatever be the case, if successful, the increased volumes will greatly boost profitability at AMD, since the newer products will have higher ASPs and therefore generate higher margins.
AMD also battles NVIDIA in discrete graphics where it gained significant market share in the first quarter before relinquishing those gains in the second as some price competition played out, according to Jon Peddie Research. Both companies have new products lined up for the fourth quarter build season and there’s nothing to suggest any deterioration in AMD’s market share of around 30% (NVIDIA owns the rest of the market).
Semiconductor product cycles are long, so AMD is likely to hold its gains in the near to midterm and Intel will have to try really hard to contain it if it can. This is likely why analyst estimates for AMD are soaring. The following chart shows that the earnings estimate for the current fiscal year is up 63.6% over the past year-
This looks more than priced-in, however-
AMD’s PEG of 4.51X is high, both with respect to the historical period when it has varied between 7.43X and 3.35X with a median value of 4.40X and the S&P 500 PEG of 1.78X.
It also isn’t attractive on the basis of sales. The current P/S (TTM) of 5.72X recently shot past the S&P 500’s 3.48X and is close to its 6-month high of 5.86X.
Recommendation
AMD might have a lot going for it, but the rich valuation keeps us from the name. The shares therefore have a Zacks Rank #3 (Hold). For smarter picks, see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.