Advanced Micro Devices (NASDAQ:AMD) has had an excellent 2021 and investors are enjoying the growth of the company. AMD stock saw the biggest highs over the past year and was very close to hitting triple digits. The stock hit an all-time high of more than $99 in 2020. However, thanks to volatility the stock is far from its peak. This is a great opportunity to buy AMD stock.
The stock is trading at around $80 today. It could certainly be the best growth stock for the year. I believe the company will get a push in 2021 with the strong first quarter results and the recently announced share buyback plan. With that in mind, let’s take a look at the investment case for AMD stock.
AMD Stock: Stellar Q1 results
AMD recently reported Q1 results passing analysts expectations and raising hope about the future of the company. The revenue stood at $3.45 billion which is a 93% rise year over year and a 6% rise over the last quarter.
The gross margin was 46% which is constant year over year while the operating income was $662 million as compared to an operating income of $177 million a year ago, showing a 223% rise year over year. Higher revenue led to a rise in the operating income for the quarter. Further, the net income of the company stood at $555 million as compared to $162 million a year back, up 243% year over year.
The cash balance at the end of the quarter was $3.12 billion. AMD certainly had a blow-out quarter and the numbers are proof. It beat analyst estimates and has hit new highs in revenue and operating income. AMD went from $2 billion in 2014 to $90 billion in market value in 2021.
For the second quarter, the company expects revenue to hit $3.6 billion, which is an 86% increase year over year. For the full year, the company expects revenue growth of 50% over 2020. It expects the growth to be driven by all businesses.
Further, AMD is supposed to complete the $35 billion merger with Xilinx (NASDAQ:XLNX) later in the year. This merger could be game-changing for the company. In the recent quarterly reports, Xilinx beat expectations and reported a profit of 82 cents per share. There is a 13% rise in revenue amounting to $851 million, which is a record for the company. It also reported a net income of $188 million for the fourth quarter and full-year earnings of $2.62 per share.
The numbers are right before the planned merger and it shows the tremendous potential of the company once the merger is complete. The decision about the same will be taken by July 6.
$4 billion buyback plan
AMD made strong headlines after announcing the first buyback plan worth $4 million since 2001. The repurchase will not be funded by debt, but rather by the cash generation of the company.
AMD is enjoying one of its best years and riding a massive success wave. It is growing across all fronts with the success in Ryzen gaming. The revenue has been consistently growing since 2017 and is accelerating with each passing year. With revenue, the company’s cash flow margin is consistently growing displaying the strength of its products.
If the company continues to grow at the same pace, it will be worth much more in the next two years and AMD stock will hit a new peak. Currently, the company has a cash balance of $3.12 billion and it will easily have a free cash flow of $4 billion and can complete the buyback program through cash generation.
The Bottom Line on AMD stock
The strong fundamentals and a stronghold in the market make AMD the perfect growth stock. Considering the growth in sales and revenue across all products, the company could report new highs this year and AMD stock could hit $100.
If AMD can continue to grow market share like it has been doing in the past, it will certainly reward investors.
If you are looking for a growth stock to add to your portfolio, buy AMD stock and hold it 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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.