AMD Stock Proves It’s a Buy-and-Hold-Forever Play After Q2 Earnings

Tech giants have shown tremendous growth over the past year despite the pandemic and the chip shortage. There is no stopping the growth of Advanced Micro Devices (NASDAQ:AMD) stock this year as well.

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The company recently reported Q2 results and showed its strength in the competitive industry. AMD stock climbed 7% after the results.

The company managed to beat analyst expectations for the quarter. It is currently trading at its all-time high of $106. AMD stock has the potential to march ahead and become a top leader in the tech industry. 

I have always been bullish on AMD stock and strongly believe that the company will beat Intel (NASDAQ:INTC) over the years. I recommended a buy before the Q2 earnings.

AMD stock has grown 1300% over the past five years and is up 28% over the past year. The company has laid a very strong foundation and has the potential to soar to new highs and a lot of credit goes to the CEO Lisa Su.

Let’s take a look at the earnings in detail to understand the strength of the company. 

Stellar Q2 Results

Advanced Micro Devices earned 63 cents per share with a sale of $3.85 billion in the second quarter. The company beat analyst estimates who had forecasted earnings of 54 cents per share.

The increase in revenue was driven by Computing and Graphics Processing unit segment. The sales increased by a whopping 99% year-over-year, and the earnings increased by an impressive 250% year-over-year.

Further, the company reported a 48% percent gross margin and an operating income of $81 million. The increase in revenue led to a significant rise in operating income. 

The profit stood at $710 million in the quarter as compared to $157 million a year ago. More than 20% of the revenue came from “Data Center” which is booming and is expected to grow. Even if there is a decline in PC demand, AMD’s business will not slow down. 

AMD has a cash balance of $3.79 billion and the cash from operations stood at $952 million as compared to $243 million a year back.

The company reported an impressive free cash flow at a record $888 million. It reflects high liquidity and financial stability.

AMD will be able to use the cash to expand its product portfolio and invest in research and development activities. 

Rival Intel reported a noticeable decline in revenue for the quarter which led to a dip in Intel stock.

The company has a bullish forecast for the next quarter, clearly indicating that it is taking the market share of server chips from Intel. AMD forecasts revenue of about $4.1 billion for the third quarter, which is an increase of about 6% quarter-over-quarter. 

It has also raised the annual outlook and expects a 60% increase in revenue, up from the earlier forecast of 50%. The company expects to achieve business growth through all the verticals. 

The Bottom Line on AMD Stock

Pandemic or not, AMD will continue to grow and the demand for its products is only going higher. The company has made a lot of progress with its products and is firing on all cylinders.

Its market share is growing with the passing year and the company is poised to become one of the best tech companies in the world. 

The gross margins are beginning to grow and the share growth will continue throughout the year. I believe AMD stock won’t look back and is only going higher. 

Not to forget the Xilinx (NASDAQ:XLNX) acquisition that will come to a close by the end of the year and will benefit AMD significantly. 

It is one stock to buy and hold forever. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

View more information: https://investorplace.com/2021/08/amd-stock-proves-its-a-buy-and-hold-forever-play-after-q2-earnings/

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