Is AMD Stock a Buy, Sell or Hold Right Now?

Author: Finscreener

Estimated read time: 3 minutes

Publication date: 7th Feb 2022 10:57 GMT+1

On Tuesday, February 1, Advanced Micro Devices (NASDAQ: AMD) reported its fourth-quarter and full-year financials for 2021, crushing the analysts' expectations. Following the chipmaker’s strong forecast for 2022, its shares went up by as much as 11% during extended trading hours.

AMD has been making remarkable developments in its revenues and profits over the past few years. With its next-generation manufacturing technology, the company has successfully made deep inroads into the data center market. In addition, AMD has capitalized on the increased adoption of cloud-based services. Its agile outsourced manufacturing model has helped it capture a more significant market share from its rival, Intel (NASDAQ: INTC). 


Key financial numbers for AMD in Q4 and 2021

The fourth quarter of 2021 was one of AMD’s best-performing quarters. Driven by strong sales across business segments, AMD generated $4.8 billion in revenues, which was 49% higher compared to the same period in 2020. Consequently, its operating income also smashed the market’s expectations and grew to $1.2 billion from the $570 million recorded a year ago. This was possible because the company could sell more chips despite an inflationary pricing environment.

However, despite a surge in operating income, AMD’s net earnings fell to $974 million compared to $1.8 billion in the year-ago period. The decline was due to its Client and Enterprise segments which saw operating income partially offset by higher operating expenses arising from higher wafer prices charged by TSMC and increased shipping costs. However, in 2021, AMD’s sales were up 68% year over year while net income rose by $700 million. 

Moreover, AMD’s liquidity position has shown significant improvement. The company generated an additional $256 million in free cash flows, and its cash from operations grew by $278 million in 2021. These increases in cash flows will allow AMD to increase strategic investments to enhance long-term supply chain capacity and support revenue growth going forward.  AMD also repurchased $756 million of common stock during the quarter.

The company is looking forward to another exciting year in 2022. It expects its revenue for the first quarter of 2022 to be around $5 billion reflecting a 45% growth rate, while for the entire year, revenue is forecast around $21.5 billion, translating to a 31% growth compared to FY 2021.


Will next for AMD stock investors?

AMD had made some significant developments in 2021, and the current year also seems to be pretty interesting for the company. Its Chief Executive Officer Lisa Su had emphasized AMD will be ramping up its existing portfolio and is preparing to launch its next generation of PC, gaming, and data center products. 

Moreover, within the first quarter of 2022, it intends to acquire China-based company Xilinx (NASDAQ: XLNX), giving it the much-needed firepower to compete with Intel in the data center chip market. AMD has already received approval from Chinese regulatory bodies, while the FTC approval is pending. 

AMD claimed it has secured production capacity to meet its revenue guidance for 2022, despite the ongoing supply chain challengers and global chip shortage. 

The strong demand for AMD's processors and its competitive advantage over its rivals have continuously bolstered the company's sales significantly over the past few years. However, the best thing about this company is despite facing such tough competition from rivals like Intel, it has consistently maintained its winning spree by developing accurate strategies. Thus, investing in this stock now won't be a bad idea because even if factors like slower growth in demand, stronger competition, or continued supply constraints pose threats, AMD will continue to thrive.

Disclaimer: The writer is an experienced financial consultant who writes for The observations he makes are his own and are not intended as investment or trading advice.