For Immediate Release
Chicago, IL – March 9, 2022 – Zacks Equity Research shares Advanced Micro Devices
AMD
as the Bull of the Day and MicroStrategy
MSTR
asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Enphase Energy
ENPH
, SolarEdge Technologies
SEDG
and SunPower
SPWR
.
Here is a synopsis of all five stocks:
I last wrote about
Advanced Micro Devices
a month ago, after another stellar beat-and-raise quarter, and the story has only gotten better. The price has gotten better too with the market fallout on the Russian military invasion of Ukraine.
And the company gave investors another reason to take advantage of the bargain levels with the announcement of an additional $8 billion share repurchase program.
On February 24, AMD announced that its board of directors approved a new $8B share repurchase program. The new authorization is in addition to the $4B share repurchase program announced in May, under which the company has repurchased approximately $3B of shares of AMD common stock.
“We are pleased to expand our share repurchase program based on the strength of our balance sheet and expectations for future free cash flow generation,” said AMD Chair and CEO Dr. Lisa Su. “With our strong financial performance, we are able to increase investments to drive long-term growth while returning additional value to our shareholders.”
And two days prior, we saw this nice upgrade…
Bernstein upgrades AMD to Outperform with a $150 price target: Analyst Stacy Rasgon wrote in a research note that the combination of continued stellar execution, increasingly bankable earnings power, and a recent sizable pullback made the valuation downright attractive. So the analyst is, for the first time in almost a decade, pulling the trigger and upgrading the stock to Outperform.
Rasgon noted that since the November peak the stock has fallen 30%, entirely due to the multiple and now trades under 30-times near-term EPS and 20-times a likely $5-plus in earnings power, approaching the cheapest in 5 years. Overall, the analyst believes the stock is looking “increasingly attractive for investors who might have continued to sit on the fence, likely for too long.”
Of course, I couldn’t agree more. And the analyst didn’t even consider the relative valuation to AMD’s only peer, NVIDIA.
The Rise of a Duopoly in HPC and AI
AMD has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focused company from a pure-bred consumer PC and gaming chip provider.
And after another beat-and-raise quarter — where the Lisa Su starship offered guidance for Q1 EPS that was 30% above consensus Street estimates — the stock is on its way back to the old highs.
AMD has emerged as a strong challenger to NVIDIA’s dominance in the GPU (graphic processing unit) market based on its Radeon technology. Launch of 7 nanometer (nm)-based AMD Radeon RX 5700-series gaming graphics card family featuring RDNA architecture, high-speed GDDR6 (Graphics Double Data Rate type 6) memory and support for the PCIe 4.0 interface, has helped the company increase presence among gamers.
Since the technology of GPU chips for gaming has driven the R&D for high-performance computing (HPC) and artificial intelligence (AI), AMD has joined NVDA in the “category of two” where enterprises and scientific research institutions must have their technologies to crunch large amounts of data at hyper-speed.
In fact, many use both company chipsets to foster “dissimilar redundancy” in platform architecture, performance, reliability, and sourcing.
I’ve been a big AMD bull since last March when you could buy it at $75. I last wrote about it publicly in late October and here’s what I said…
Why I’ve Been Pounding the Table on AMD Since $75
I’m going to share more details about this fantastic growth — plus a bandwagon full of analyst reactions — but first let me explain why I was telling everyone who would listen this past spring to buy AMD at $75.
Essentially, it was all about how well CEO Lisa Su and her teams were executing in the dynamic, cutting-edges of semiconductor innovation, just like my favorite GPU-maker NVIDIA.
Plus, not only was she eating Intel’s lunch at every turn in PCs and notebooks with sub-10 nanometer technology, the stock was consistently trading at half the valuation of NVDA.
Even today, AMD is trading for under 8 times next year’s projected sales of $18.8 billion while NVDA leaves the atmosphere (for chips) at over 21X sales!
See an excellent primer on the victory over Intel here…
Release the Ryzen! AMD Roars in the Nanometer Wars
Stunning Q4 and Guidance
AMD reported fourth-quarter 2021 non-GAAP earnings of 92 cents per share, which surpassed the Zacks Consensus Estimate by 22.67%. The bottom line soared 77% year over year and 26% sequentially.
Revenues of $4.83 billion outpaced the Zacks Consensus Estimate by 6.69% and surged 49% year over year. On a quarter-over-quarter basis, the top line increased 12%.
Robust performance by the Computing and Graphics, and Enterprise Embedded and Semi-Custom segments drove year-over-year improvement, as AMD benefitted from strong Ryzen, Radeon, and EPYC processor sales.
In my Zacks TAZR Trader portfolio, we already had an AMD position and we were ready to be buyers again near $100. But after the market sell-off lost momentum, and AMD delivered the goods, we had to settle for adding near $120. Here’s what I told our members…
AMD Has the Green Light for New Highs
Our bright spot today was a nice beat and stunning outlook from AMD.
Shared gapped up over 10% but met sellers as some analysts only raised price targets into the $130-140 zone like BMO and Truist.
But the Lisa Su starship managed to keep 5% on massive volume of 180 million shares — the most since it surged to new highs above $120 back in August.
Let’s hear what the bulk of positive analyst reactions were focused on in this report…
AMD price target raised to $155 from $145 at Jefferies: Analyst Mark Lipacis noted the remarkable results and outlook with Q4 EPS and Q1 EPS guidance that were 21% and 31%, respectively, above consensus. After about 600 basis points of server CPU revenue share gains in 2021, he expects another 200-300 points in server share gains in Q1, adding that he believes its next-gen server significantly increases its average selling prices due to much higher core counts.
AMD price target raised to $160 from $150 at Cowen: Analyst Matthew Ramsay noted the guide to 31% growth to start the year which was well above his expectations. He said market share gains are driving significant growth in PCs and servers, further amplified by GPU/console upside. Ramsay said the guidance to start the year shows visibility into customer-driven demand and improved supply.
AMD price target raised to $160 from $140 at Raymond James: Analyst Chris Caso said “AMD’s December quarter results were exceptional,” and thinks there’s an expectation that numbers will move higher throughout the year as more supply becomes available, particularly in 2H22.
AMD price target raised to $165 from $155 at KeyBanc: Analyst John Vinh noted AMD’s strong results and guidance, both of which were above expectations driven by strength in client PC, which grew DD% year-over-year, and data center, which more than doubled year-over-year and exited 2021 at mid-20% of total revenues. Accordingly, AMD sees over 30% revenue growth in 2022 and, Vinh noted, management believes it has secured enough capacity to support this growth.
AMD price target raised to $180 from $175 at Susquehanna: Analyst Christopher Rolland said upside was broad-based across all segments and should continue into 1Q22 as better demand and supply both contribute to March guidance that now bucks the typical first-quarter seasonal decline. He said the company is buying stock, $1B worth in just the last few weeks, and he recommends investors do the same. As the second-biggest bull — next to me — Rolland gives sound advice.
I’ll reiterate my stance on AMD: As long as NVDA can trade for over 15X sales (currently 19.5X next year’s $31.5B), then AMD is a steal under 10X sales (currently 6.4X next year’s $22B). That’s why it has the green light to go for the old highs.
(end of TAZR commentary from Feb 2)
Since then, revenue estimates for AMD next year have been boosted to over $24 billion. So with the stock market drop, AMD is now trading for under nearly 5 times sales at $105. Meanwhile, NVDA’s consensus revenue forecast for next year has risen to $39.5 billion, which brings its price/sales ratio down to 13.5X at $215.
As I told Zacks Ultimate members in a private member update recently (before Russia-Ukraine), either NVDA is going to come down, or AMD is going for new highs. So far, they’ve both come down and the P/S spread has narrowed. Which makes AMD even more of a buy right now.
I last wrote about
MicroStrategy
as the Bear of the Day on January 12 when shares were trading $520 and Bitcoin was struggling to stay above $42,000.
A week later, MSTR made a new 52-week low as Bitcoin plunged to $34,000. If you don’t know why the two are so closely correlated, I will explain.
MicroStrategy is the $5 billion business-intelligence software, logistics, and IT consulting firm that has become synonymous with the idea of the “Bitcoin balance sheet.”
The company’s iconic “laser eyes” CEO, Michael Saylor, is often seen on financial and social media expressing the virtues of accumulating Bitcoin for the inevitable run toward $100,000 and much higher.
Looking at the topline revenue growth of MSTR that might justify trading for over 9 times sales, we see 2021 was a year of projected 5.9% growth to $510.75 million.
The coming year doesn’t improve much, with only 4.5% forecast growth to $533.7 million.
Profit Plunge on Bitcoin Blowup?
But the real story as far as the Zacks Rank Strong Sell designation revolves around the earnings picture.
On February 1, MicroStrategy delivered a quarterly loss of $8.41 per share versus the Zacks Consensus Estimate for a gain of $1.58. This compares to earnings of $2.07 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -632.28%. A quarter ago, it was expected that this business software company would post earnings of $1.12 per share when it actually produced earnings of $1.86, delivering a surprise of 66.07%
Despite the huge reported Q4 loss, analysts are projecting profits of $6.64 per share this year. But this is down 14% from the consensus before earnings.
This makes the P/E valuation pretty rich at over 60 times. And next year’s EPS forecasts by analysts don’t leave much to get excited about with flat to negative growth.
Laser Eyes Go Bloodshot: Where Does Bitcoin Fit In?
This is only based on the contributions of two analysts, but therein lies part of the problem. When analysts aren’t sure how to model the earnings growth of a company that owns more Bitcoin than its market capitalization, some have preferred to close up their spreadsheets and move along elsewhere.
Here’s what I found out in early January…
According to Fortune magazine, in late November recent new Bitcoin purchases by MSTR pushed their holdings to just over 121,000 of the precious “coins.”
This lot was valued at nearly $7 billion then. And with an average purchase price of about $29,500 per coin, the company was showing a net gain of about $3.4 billion on those investments.
But Bitcoin has continued its epic slide from all-time highs above $68,000 and MSTR fortunes have fallen with it. The stock of the company was at nearly $900 in early November and this week bounced off of $450.
(end of excerpt from my January article)
In a statement following the release of its earnings, MSTR said it bought approximately 660 bitcoins for around $25 million between Dec. 30, 2021, and Jan. 31, 2022.
The company paid an average price of $37,865 per bitcoin they revealed.
According to Coindesk in an article on February 2, “MicroStrategy now holds a total of 125,051 bitcoins, valued at about $4.8 billion at the current bitcoin price of $38,700.”
Grasping MSTR Without BTC
I’ve written about MSTR in the past as an innovator in global trade logistics, with potential in using Blockchain applications. This core business should be of interest to many investors looking for intelligent exposure to the future of trade.
They had recently inked a deal with TD SYNNEX whereby MicroStrategy’s comprehensive software platform will include self-service data discovery, enterprise reporting, mobile applications, and embedded analytics to facilitate expansion of TD SYNNEX’s internet of things, data, and analytics portfolio.
As Bitcoin struggles to hang on to support above $40K, many bears are ringing the death rattle. Like Peter Schiff, who believes a bigger reckoning toward $30K is coming.
Whatever the fate of Bitcoin, various MSTR investors may see new opportunities on the horizon.
Just wait until the earnings estimates stabilize. The Zacks Rank will let you know.
Additional content:
Solar and Storage to Lead New U.S. Electricity Generation Capacity
Per the Preliminary Monthly Electric Generator Inventory report recently published by the U.S. Energy Information Administration, solar power and battery storage projects are projected to constitute 60% of the 85 gigawatts (GW) of new electricity generating capacity to be added in the United States during the 2022-2023 period.
Naturally, such an impressive forecast brings the spotlight on solar stocks, especially the ones engaged in manufacturing and handling storage batteries and associated technologies, like
Enphase Energy
,
SolarEdge Technologies
and
SunPower
.
Key Notes from the Projection
Between 2020 and 2021, 24 GW of utility-scale solar photovoltaic (PV) capacity was added to the U.S. power grid. Expecting to witness a similar trend, 41 GW of the new electricity generation capacity is projected to come from utility-scale solar in the next two years, buoyed by catalysts like plummeting solar technology costs and the extension of the solar investment tax credit.
The battery storage capacity to be added to the U.S. power grid during 2022-2023 is expected to be 10 GW. Factors like declining costs for battery storage applications along with favorable economics, when deployed with renewable energy, should boost the expansion of battery storage.
Together, solar and battery storage capacities to be added to the U.S. power grid in the next two years will be 51 GW. This projection implies an improvement of 4.1% from 49 GW expected in the Electric Monthly update posted in December.
Stocks to Watch
Considering the aforementioned discussion, it is obvious that the U.S. solar stocks with a keen involvement in the battery storage space should benefit and thus must stay on investors’ watchlist. Some of these stocks are:
Enphase Energy
enjoys a solid position in the solar market. It manufactures fully integrated solar-plus-storage solutions. Its next-generation battery in North America is Enphase Encharge 3 and Encharge 10 storage systems, with a usable and scalable capacity of 3.4 kWh and 10.1 kWh, respectively.
The company expects to ship between 110 and 120 megawatt-hours of batteries in the first quarter, implying an almost 15% improvement from the fourth quarter. The Zacks Consensus Estimate for 2022 earnings and sales suggests a 30% and 45% improvement over the prior-year quarter’s reported figures, respectively.
SolarEdge Technologies
launched its residential battery, the SolarEdge energy bank in 2021. This is a 10-kW single-phase battery that integrates with its SolarEdge energy hub family of inverters. Some existing SolarEdge systems can be upgraded with a storage solution for both backup or on-grid maximum self-consumption use.
The stock boasts a long-term earnings growth rate of 21.5%. The Zacks Consensus Estimate for 2022 earnings indicates a 44% improvement over the prior-year quarter’s reported figure.
SunPower
’s SunVault storage solution is primarily designed for residential customers and its two-box solution fits in indoor or outdoor areas. In the fourth quarter of fiscal 2021, the company launched its Virtual Power Plant (“VPP”), which will enable SunVault energy storage customers to get paid for allowing the utility to use stored energy during peak demand and contribute to a more stable power grid in their community.
The company boasts a long-term earnings growth rate of 215.6%. The Zacks Consensus Estimate for 2022 earnings implies a solid 457% improvement over the prior-year quarter’s reported figure.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
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5 Stocks Set to Double
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