LucaMeer
Edited
Greetings investors, followers, copiers, and potential copiers. INTRODUCTION: I wish to begin this journey into portfolio analysis by starting with AMD. I did not choose it by chance, but because it was recently downgraded by Morgan Stanley, with its rating moving from "overweight" to "equal weight." MORGAN STANLEY DOWNGRADE PREMISE: Concerns about overly high expectations from investors regarding AI, although the price target remained unchanged at $176. Why the downgrade if the price target remains unchanged? This is because AMD remains well-positioned in its main markets of CPUs and servers, while the only thing in question is the expectations tied to the AI boom. Recall that even Lisa Su mentioned in one of her speeches that building a business takes time, referring to AI. Note: Nvidia sees AMD as a serious threat, capable of replicating the ability to be in multiple clouds and offering CSP customers the option to avoid vendor lock-in. BRIEF FUNDAMENTAL ANALYSIS REVENUE: Revenues: represents the total amount generated from the sale of goods/services. - FY 2019: $6,731 million - FY 2023: $22,680 million - Difference: (+237%) Net Income: represents the total amount earned by a company after all costs, expenses, and taxes have been deducted from total revenue. - FY 2019: $341 million - FY 2023: $854 million - Difference: (+150%) Diluted EPS: a crucial metric for financial analysis. It allows evaluating the company's profitability, i.e., how much the company earns per outstanding share. Diluted because it considers all convertible securities: convertible preferred shares, warrants, stock options, convertible bonds. - FY 2019: $0.30 - FY 2023: $0.53 - Difference: (+77%) Operating Expenses: Represent the costs incurred by the company for the production and sale of goods/services. - FY 2019: $2,297 million - FY 2023: $10,093 million Gross Margin: Represents the difference between the selling value of the product/service and the direct costs associated with its production, i.e., the profit the company earns before subtracting indirect costs. - FY 2019: $2,868 million - FY 2023: $10,460 million - Difference: (+265%) Based on the data, AMD does not appear to be over-indebted and enjoys solid financial health. Most of its debt comes from equity, and its operating cash flows are robust enough to cover operating and financing expenses. Additionally, the FCF (Free Cash Flow) indicates good cash generation, which is a positive sign and reflects prudent debt management by AMD. These are just some of the GAAP (Generally Accepted Accounting Principles) data - in short, they are a set of rules and guidelines for preparing financial statements in the U.S. Thanks to this uniformity and standardization, different companies operating in the same sector can be compared. The purpose of this comparison is to show you how the long term, despite short-term volatility, almost always positively rewards investors - as I always say, awareness of your investments is the foundation of everything. There are many other financial indicators to consider for a correct evaluation of the company, not to mention the importance of comparing it to others in the same market segment. CONCLUSION In summary, despite the downgrade, considering that the price target remains unchanged, and net of a P/E Ratio that is indeed high compared to competitors, in my opinion, there is still no reason to panic about AMD. We must trust that investors understand that expectations driven by the emotion of the moment are exaggerated - both negatively and positively. But net of these, AMD has what it takes to provide satisfaction in the long term. All the data reported in this post can be found in the 2019 and 2023 financial reports on the AMD website, investors section. $TSM (Taiwan Semiconductor Manufacturing Co Ltd - ADR) $AMD (Advanced Micro Devices Inc) $NVDA (NVIDIA Corporation) $AVGO (Broadcom Inc) $SPX500 $NSDQ100