Hey guys, it's sasha amd's share price has gone up over six percent to 96.70 in pre-market trading, as i'm recording this video, and this is all because last night amd published their q1 results and boy were those results good like really really good in this video. I am going to tell you all the important stuff that you need to know share some of the data share, some of the insight from these results and my forecast and share with you the model that i have for the valuation and what my target price for Amd is, and just as a reminder, i am a long-term amd shareholder. I have owned the stock for some time and i continue to own it, including in my public man versus the market portfolio. In fact, i bought more amd stocks just last week before these results came out.

I shared that move with my channel members and patreons in the discord by the way, if you want to join my discord for live, up-to-date updates information discussion of stocks, the link to my patreon is in the description, but it may mean that, because i am an Amd shareholder, my analysis is biased because, according to many people in the comments section, i just spend my entire time pumping the stocks that i'm invested in, but now that this disclosure is out of the way, let's go and pump uh analyze. Amd's results for those who do not know amd is a company that manufactures computer chips that make processors and graphics cards for computers for other companies, for people who use with them within their own products, things like xbox, playstation, tesla, etc. So amd posted revenues of 5.9 billion dollars in q1 2022 - that is up 71 percent year on year and before we go any further, it is really important to point out that amd acquired a company called xilinx part way through this quarter. So a bunch of these numbers in here are going to look a little off, sometimes maybe a little bit better than the reality, because you're not comparing apples to apples on page 17 and the presentation that amd published, you can find some helpful high-level numbers for q1.

Excluding that zionist acquisition - and you can see here that amd made 5.3 billion without xilinx, which is still a very solid 55 percent year-on-year growth and another really important point - is that amd's margins still continue creeping up, which is a really good sign. Gross margins were 51 percent and operating margins 30, excluding xilinx, and if you break down those numbers into segments, you'll see that the enterprise segment is growing at an absolutely insane rate and has now become amd's main business line. It has been pretty clear to some analysts and i have had this in my models for a while. Now i was talking about this switchover happening on the channel for the last two years, but here we are and the enterprise segment is posting an million dollar operating income for q1, a bonkers 288 increase year on year, and that makes the computing and graphics segment growth.

Of 49 year and year seem slow, which is ridiculous, and in the next quarter or two, the enterprise segment should have overtaken the retail segment on revenue as well as well as the income, except in the earnings score. Last night amd announced that from next quarter they will break down their business differently. Instead of these two categories, plus xilinx reported separately, the company will now have four different divisions: data center, client, gaming and embedded. So the enterprise segment will become data center gaming and embedded computing and graphics or split into data center and client, and this makes a whole lot of sense because this splits out amd's business into distinct product lines.

Data center is everything that goes into cloud computing into server farms. The sector that has been absolutely exploding for amd recently client will be the retail sales of processors for computers. Gaming is the supply of game consoles like the latest xbox and playstation, and graphics cards and embedded is a set of custom chips built specifically for clients. Xi links will fit into this business line, as will clients like tesla now.

I would personally probably have kept gpus in the client sector, rather than bundle it together with the consoles, because they're fundamentally different classes of products, and it would be a better distinction, but anyway, this should still make it a lot easier to analyze, as i'm going to Get those numbers because we will be able to understand amd's business growth by individual lines better over time. So i'm looking forward to that in total amd made a net income of 786 million dollars on a gap basis which goes up to 1.6 billion dollars on a non-gaap basis. That is a huge difference. It's more than double and the vast majority of this difference comes from acquisition, related costs and amortization.

The really funny bit in these financials, because when you go and look at the balance sheet, that's been reported because that big acquisition of xilinx has completely destroyed it amd. Now have this giant load of hot air sitting on a balance sheet: 23.1 billion dollars in goodwill and 26.8 billion dollars in acquisition related intangibles and those numbers completely dwarf everything else in there and in general they don't really mean very much so for analysis. You kind of pretty much discard them, although they are enormous. Goodwill is the difference between what amd paid for xilinx and the actual monetary value of the assets that xilinx came with, and naturally you don't go and buy a business, for you know the physical property that they own or physical assets in their warehouse.

You buy it for the long term products and the ip and the dedicated brand and everything else that they've built up over time, and they will continue to be able to profit from and grow in the future and because amd paid for the acquisition by giving out Shares you can see down at the bottom of the balance sheet, that additional paid up capital also went up by a huge 46 billion dollars. So anyway, amd's business is exploding and by their own admission on the earnings score, some parts of the business are continuing to grow far faster than previously expected them included amd revised their full year 2022 projection for revenue from 31 growth year on year, when they published The last set of quarterly results just three months ago to 60 year-on-year when they published results last night. This is a staggering increase in projections for just this year, and here is the fun part. Their q1 revenue grew by 71 year-on-year.

We already know that that does include xilinx, but so does the projection. Their q2 revenue is projected to grow a 69 year-on-year again, including xilinx, but also included in the projection total, and this is being published more than a month into that quarter. So they're saying that the two quarters so far have roughly each netted 70 as of the end of q2. Whenever we get that data.

But they are then saying that the whole year is only going to grow by 60, which implies that they think the growth rate in q3 and q4 is going to drop considerably or they are potentially sandbagging. Now there was literally nothing in the presentation or on the call that suggested growth is likely to drop sharply in the second half this year. In fact, everything was saying kind of the opposite. The only mentions of how different business lines are performing indicated that data center and gaming consoles continue doing really really well for amd and going through the roof.

Retail sales have had a slightly softer period, but they're expecting that to pick up because of a change in product line and development into q2, where numbers are generally higher anyway, they were careful in their wording, but it almost sounded like they were limited by their ability To scale manufacturing and supply chains rather than the growth and demand, which is phenomenal for this type of business, in fact, many of their most popular and more powerful products are continuously out of stock. If you go and look them up, it is incredibly difficult to find them, because the moment a shop goes and gets hold of any. They fly off the shelf like many other components, including by nvidia as well, but here's the model that i revised from the data in this latest quarterly report and i have split the projections up into the existing three business lines rather than the four new ones, because I don't have any data on the new ones until they publish that data in the q2 report and i went through all of amd's and xilinx's old reports to get some historic figures now, i've kept this one really simple: i've put computing graphics revenue as having maxed. Last year, and the assumption is that revenue growth will then gradually decline year on year every single year, the rate of growth is going to go down towards less than 20 per year in 2027..

Do i think this will happen? Maybe i don't know, i feel we are still in the early part of the s curve, so i think it's actually probably a bit on the pessimistic side, but let's just be a little conservative and for enterprise. I have done the exact same thing. We saw an 88 growth in q1 year on year, but i penciled in only 70 growth in total for the year, and then i bring that number quite sharply down every year after that now i actually have a good feel that the data center and embedded sectors For amd are going to continue to absolutely kill it for a few years yet, but to have some kind of a reasonable assumption here. I am also assuming that the peak, maybe could have happened in terms of the rate of growth and unforeseen things.

Increased competition and other stuff may mean that the rate of growth doesn't quite go as well as it has been now for xylinks. I've kept the numbers really quite consistent and conservative, except i assume that their operating margin will get a slight bump because of shared resources, shared costs with the rest of the amd family, and that may result in some slightly better efficiencies. Now, after doing the sums using these assumptions, i get a total revenue of 27.3 billion dollars for amd for 2022 about one billion dollars more than they stated in their guidance and then the rate of growth generally declines every year, except in 2023 and in 2023 the Rate sort of goes up from 39 to 44. That is only because, though, the business shifts from making roughly the same amount of revenue from both enterprise and retail, to enterprise being considerably bigger a bigger proportion of the total and because enterprise is growing faster than retail.

At the moment, that means that the average rate of growth goes up, even though both the retail rate of growth and the enterprise rate of growth dropped from 2022 to 2023, which is an interesting another interesting example of the simpsons paradox but anyway. So looking at the dcf output, i have used the same 10 annual discount rate at the top and i'm using a 21 tax rate, which is a lot higher than the 13. That amd blended rate currently is, but i'm happy to keep the difference as a buffer cushion and just assume that the full u.s tax rate at 21 is going to apply. I then have a four and a half cent long term growth rate in the model from the end of 2027 and a 20 times multiple on ebitda and i've stuck 1.64 billion shares in here, which will be the maximum number of shares in the foreseeable future, which Will happen in q3 this year, according to amd before amd, goes and buys back 8 million of those shares.

This number has jumped massively recently because amd bought xilinx by printing more shares, and this is a prime example of the case. Where share dilution does not automatically mean that existing shareholders are getting screwed. In fact, the per share numbers this quarter are up, despite the number of shares, also going up considerably in the same time period, and my opinion is that the synergy and the extra business growth opportunity from the signings deal will bring amd substantially more value than the Dilution effect of the issuing of those new shares - and you can see here that the share price comes out at 178, using the perpetuity approach and 230 dollars using the ebitda multiple version and i'm gon na go somewhere in the middle leaning towards the lower perpetual growth Model in this case and call it a 200 target share price. So for me this looks kind of good for a company that is posting these sorts of numbers and showing this level of performance to have an upside of over a hundred percent.

For me is nuts, and at the moment there are a fair few companies out there that i think have very, very tasty valuations after the stock market has had a massive sell-off over the last five to six months. Amd is definitely one of those companies for me and i will be buying more shares as and when i get some cash to spend. Now, if you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching.

I really really appreciate it and, as always i'll see you guys later.