🤖📈 AMD's Earnings Sucked, but its Future Doesn't

AMD reported Q1 results in line with expectations, driven by strong data center and Xilinx revenue. Despite weak PC demand and high cloud customer inventories, the author remains optimistic about AMD's data center business. They expect AMD's 5-nanometer Genoa server CPUs to gain market share from Intel in the coming quarters. AMD's shares are undervalued compared to the author's fair value estimate of $115 per share. With a narrow economic moat rating due to its x86 license and chip design expertise, AMD is well positioned for data center growth and potential market share gains in the PC market. However, the shift to ARM-based CPUs is a risk for both AMD and Intel. The Xilinx acquisition strengthens AMD's position, and the author is bullish on its data center segment, expecting a 13% CAGR through 2027. AMD has an Exemplary Capital Allocation Rating, reflecting a strong balance sheet, exceptional investments, and a relative lack of shareholder distribution policies.

Trip.com is a narrow-moat online travel agent in China, offering a wide range of domestic and international hotels on its platform. The pandemic significantly impacted its revenue, but pent-up demand emerged after China's reopening. The company aims to generate revenue from advertising and achieve long-term non-GAAP operating margins of 20%-30%. The key catalyst for Trip.com is the recovery of its international business. The company has a narrow moat rating due to its strong network effect and the large number of hotels on its platform. Its major competitors are smaller in size, but it faces potential market share loss in the long term. Trip.com's ROIC is expected to surpass its WACC by 2024 as the COVID-19 situation improves and its higher-margin international businesses recover. Valuation will depend on the level of recovery, particularly in international air ticketing and hotels. Morningstar's Uncertainty Rating for Trip.com is High due to industry competition and potential new entrants, while its Capital Allocation Rating is Standard.

The analyst maintains a BUY rating on Marriott International (MAR) with a target price of $202, citing its profitable fee-based business, strong liquidity, emphasis on corporate travel, and global operating model. Marriott reported adjusted 1Q23 EPS of $2.09 and a 36% YoY revenue increase. The company is expanding with new properties in Japan and entering the safari segment in Africa. The analyst raises 2023 and 2024 EPS estimates. Marriott's financial strength rating is medium, and its debt is investment grade. However, Marriott faces risks from weak economic conditions, rising operating expenses, and the ongoing pandemic.

Analysts reaffirm a BUY rating on ServiceNow following strong 1Q23 results, with 37% non-GAAP EPS growth and 22% revenue growth. The company differentiates itself by investing in R&D and sales force expansion, and its software improves customers' business efficiency and productivity. ServiceNow is expanding its product offerings and targeting industry verticals, maintaining a 98% renewal rate. The company is also developing strategic partnerships and extending sales reach. However, risks include macroeconomic downturns, growth transitions, and potential data breaches or service platform issues. ServiceNow's financial strength is rated medium-high, and the author maintains a BUY rating with a target price of $650.

Microsoft's Q3 FY23 results show continued growth in its Productivity & Business Processes and Intelligent Cloud segments, with reduced cost growth and mid-teens EPS growth expected in Q4 FY23. The company has a strong brand, synergies in data flow and security, and economies of scale. Microsoft's FTE headcount increased during the pandemic, but management aims to align its cost structure. The U.K.'s Competition & Markets Authority has blocked Microsoft's acquisition of Activision Blizzard, which Microsoft plans to challenge in court. The effects of not acquiring Activision Blizzard would be marginal. Microsoft's forecasts include an increase in FY23 Net Income and a new FY26 EPS forecast of $13.64. The estimated total return for Microsoft by June 2026 is 60%, and the company's Buy rating is reiterated.

Universal Corporation has experienced consistent growth through organic expansion, operational efficiencies, and acquisitions. Specializing in tobacco procurement, purchasing, processing, and sales, the company has diversified into new segments, which are expected to accelerate future growth. With a substantial dividend yield of 5.76% and a payout ratio of 81.73%, Universal Corporation has shown earnings growth and increased revenues. Acquisitions have helped the company enter new geographic regions, reduce exposure to regulatory and political risks, and create synergies and efficiencies. Analysts rate the company as a "buy" with a price target of $59 per share. Despite regulatory risks in the tobacco industry, the author recommends Universal Corporation as a buy for long-term dividend investors due to its diversification strategy, shareholder value creation, and slight undervaluation.

Workday, a leading enterprise software company, is considered a good investment opportunity as it trades at multi-year valuation lows, down ~35% from its 2021 highs. The company's category leadership, cloud-based recurring revenue software, ample resources, and a balance of growth and profitability make it an attractive choice. Workday's valuation at 6.2x EV/FY24 revenue is modest, and it has been less affected by the macro situation compared to other enterprise software firms. With Q4 revenue growth at 20% y/y, a healthy pipeline, and plans to expand internationally, Workday is well-positioned for future growth. The author predicts a year-end price target of $220, representing ~19% upside from current levels, making Workday a promising long-term investment.

Enovix Corporation is poised to benefit from the growing battery market, driven by increasing demand for sustainable solutions and the shift to electric vehicles. The company's key advantage lies in its energy density, achieved through design choices, architecture, and silicon anode technology. Enovix has addressed safety concerns with its BrakeFlow technology, making its product highly valuable. Despite Q1 2023 revenue and EPS falling short of expectations, Enovix saw significant growth in unit shipments. With a cash balance of $294 million, the company plans to invest in its future. Enovix's unique advantages, market opportunity, and potential for accelerated product adoption make it a favorable investment for growth-focused investors. The author has a buy rating on ENVX stock with a $22 price target.

MaxLinear (MXL) has been upgraded to a buy rating after its 1Q23 earnings results. Growth is expected to return in 1H24 in MXL's broadband and connectivity businesses due to industry upgrades following customer inventory correction. MXL is well-positioned to outperform, thanks to the adoption of its WiFi 6 and 6E access point solutions and WAV700 product family. The acquisition of Silicon Motion (SIMO) is anticipated to diversify MXL's tech platform and strengthen its position in various end markets. However, downside risk from the acquisition is factored into the stock, and caution is advised in the near term. MXL is undervalued compared to its peers and has favorable long-term prospects. Wall Street is bullish on the stock, with a median sell-side price target of $40. Short-term pain may be expected until inventory correction cycles end and the SIMO deal closes.

Google stock is being analyzed after its Q1 2023 earnings release, where the company beat expectations with revenues of $69.8 billion and operating income of $17.4 billion. Search and YouTube advertising trends are stabilizing, and Google Services gross revenue and margins expanded. The author expects growth acceleration in Search and YouTube throughout 2023. Google Cloud revenue grew 28% YoY, but decelerated QoQ, and the company is investing in generative AI for various applications. Bullish arguments for the stock include better-than-expected Q1 results, improving financial health, and an attractively priced stock. Neutral arguments include potential near-term optimization of spend and limited visibility of integrating Bard into Search. Bearish arguments include increasing competition and regulatory and legislative risks.