While AMD’s ( AMD ) stock is down slightly this year so far, the company did see some positive developments that bode well for the future. With the launch of Ryzen and EPYC CPUs, and the new range of Radeon GPUs, AMD became operationally profitable in the first 9 months of 2017, which is a significant improvement. Take a look at our interactive breakdown of AMD’s business which shows key developments for AMD this year, and potential scenarios tied to those developments.
Our price estimate for AMD stands at $10 , which is roughly in line with the market price.
AMD’s Computing & Graphics Business Strengthened
AMD’s Computing & Graphics revenue grew an impressive 51% in the first 9 months of 2017, thanks to a favorable mix in the product portfolio which led to significantly higher average selling prices. This can be attributed to the success of Ryzen desktop CPUs, which helped AMD grab meaningful market share from Intel, and the launch of Radeon GPUs aimed at the high performance gaming segment. The company appears to be focusing on a combination of performance, energy efficiency and pricing, instead of just going after the low end of the market, which it had done to an extent in recent years. For the full year, we expect Computing & Graphics revenue to grow nearly 40%. This should help turn the segment’s EBITDA margin positive. AMD has now launched the notebook version of Ryzen processors as well.
Enterprise, Embedded & Semi-Custom Business Well-Positioned With EPYC Processors
Although AMD’s Enterprise, Embedded & Semi-Custom revenue saw small growth in the first nine months of 2017, its EPYC server processors have positioned the division interestingly for potential future growth. We believe AMD has an opportunity to gain share in the server market and add to its market value (see Can EPYC Server Processors Boost AMD’s Value By 25%?). You can test and modify the assumptions and see the impact of server market share gains on AMD’s value. Recently, Microsoft Azure became the first cloud provider to deploy AMD’s EPYC processors.
Partnership With Intel Should Benefit AMD
AMD and Intel struck an unlikely partnership this year. Click here to see our detailed analysis on this
With this, AMD appears to be looking to regain its lost discrete notebook GPU market share. A 10% share gain would imply roughly $300 million in additional revenue, which would be a part of Enterprise, Embedded & Semi-Custom revenue. The significance of this incremental growth would be even more visible in the bottom line. AMD has struggled to remain profitable in recent years, and market share gains could lead to meaningful margin improvement.
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