At its analyst day, AMD (AMD) laid out a forecast for the next three to five years that BNP Paribas believes could allow the company to earn $20 or more per share in the not too distant future.
“AMD forecasts its largest growth opportunity the Datacenter market growing at a 40% CAGR to $1 [trillion] by 2030,” BNP Paribas analyst David O’Connor wrote in a note to clients. “This is a silicon [total addressable market] and includes CPU, GPU, HBM memory and Networking silicon products.”
O’Connor, who has a $300 price target on AMD, said the disclosures, including gains in the server CPU market, the AI accelerator market and more, pave the way for earnings of $20 per share over the next three to five years.
“This is driven by [roughly] 35% revenue CAGR, [gross margin] improvement to 55-58% level on larger/optimized AI GPU ramp, and operating leverage resulting in over 35% EBIT margin and 25% FCF margin,” O’Connor explained. “We came away more [positive] on AMD. The AI GPU opportunity is bigger, demand broader, engagement deeper with customers, fuelling rising confidence levels of [management]. In the scenario of [approximately] $20 EPS in 3-5-year target model, and 25x P/E multiple, implies a $500 fair value in a few years’ time, in our view.”
AMD shares rose nearly 9% on Wednesday. Shares are up more than 110% year-to-date.