The Specifics: Using AMD and Xilinx earning history, I was able to fit the data with a sloped line with an R2 value of 0.97-0.98 (meaning it's pretty linear). I combined both of them to get the best estimates. Here are the values I received. Reported in millions, except EPS.
| Report | Value |
|---|---|
| Revenue: | $6191 |
| Profit: | $3348.9 |
| Income: | $1446.3 |
| EPS: | $0.86 |
Yearly rolling EPS is $2.99 Using the current price ($82.50), hitting these earnings would create a P/E of 27.6 The U.S. Information Technology sector has traded at an average of 29.1.
Using the data now, I wanted to do more elaborate calculations. I expanded out the growth rate from the last 5 quarters to the next 4 quarters for both AMD and Xilinx; once again, I combined the revenues, profits, and incomes of these two companies.
| Report 2022 | Q1 | Q2 | Q3 | Q4 | Sum |
|---|---|---|---|---|---|
| Revenue | $6192 | $6645 | $7098 | $7551 | $27,485 |
| Profit | $3349 | $3636 | $3923 | $4210 | $15,117 |
| Income | $1446 | $1611 | $1776 | $1941 | $6775 |
| EPS | $0.86 | $0.96 | $1.06 | $1.16 | $4.05 |
Using the projected EPS for 2022, the P/E will trade at 20.37. The projected EPS by analysts is currently $0.84 for Q1 and $3.70 for 2022; this is a undervaluation by 9.4% for the year, despite being close on Q1 projections.
At the end of 2022, in order for AMD to trade within the correct P/E average for the sector, they would need to secure a price of $117.86. Their market cap would be at $197.2 billion.
Just because I can and it's easy, I did 2023 and 2024 as well. Here is the data, assuming the same growth rate from 2021. In addition, we'll assume they complete their $8bil share buyback at an average cost of $100 a share.
| Report 2023 | Q1 | Q2 | Q3 | Q4 | Sum |
|---|---|---|---|---|---|
| Revenue | $8005 | $8458 | $8911 | $9365 | $35,739 |
| EPS | $1.32 | $1.43 | $1.53 | $1.63 | $5.91 |
At the end of 2023, in order for AMD to trade within the correct P/E average for the sector, they would need to secure a price of $171.98. Their market cap would be at $274 billion.
| Report 2024 | Q1 | Q2 | Q3 | Q4 | Sum |
|---|---|---|---|---|---|
| Revenue | $9818 | $10,271 | $10,725 | $11,178 | $41,991 |
| EPS | $1.74 | $1.84 | $1.94 | $2.05 | $7.57 |
At the end of 2024, in order for AMD to trade within the correct P/E average for the sector, they would need to secure a price of $220.29. Their market cap would be at $351 billion.
Here is a quick chart outlying a Bull (45 P/E), Neutral (29.1 P/E), and Bear (15 P/E) case for AMD over the next three years, once again assuming they maintain their level of growth.
| Price Report | 2022 | 2023 | 2024 | Total Gain |
|---|---|---|---|---|
| EPS | $4.05 | $5.91 | $7.57 | – |
| Bull | $182.25 | $265.95 | $340.65 | 313% |
| Neutral | $117.85 | $171.98 | $220.29 | 167% |
| Bear | $60.75 | $88.65 | $113.55 | 38% |
I hope you enjoyed my TED Talk.
Huge Disclosure: These valuations are solely based on prior growth from AMD and Xilinx during their best years ever. Their growth may or may not be sustainable for the current market and therefore may be overestimations. This analysis was originally a confirmation basis that analysts were properly including Xilinx profits in their AMD earnings projections.
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