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Advanced Micro Devices, Inc.
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== Sensitivity Analysis == This section explores the impact of variations in key assumptions on the valuation of AMD's stock. Specifically, we examine how changes in the Weighted Average Cost of Capital (WACC) and the projected long-term growth rate affect the company's estimated stock price. The data below in USD('000) are derived from AMD financial report<ref>https://ir.amd.com/financial-information</ref>, Capital IQ and Alpha Spread<ref>AMD Intrinsic Valuation and Fundamental Analysis - Advanced Micro Devices Inc - Alpha Spread</ref>. {| class="wikitable" | colspan="2" |'''WACC''' |- |Equity |54,750,000 |- |Debt |2,956,000 |- |Cost of Debt |2.98% |- |Tax Rate |37.50% |- |D/(D+E) |5.12% |- |After Tax Cost of Debt |1.86% |- | colspan="2" |''CAPM'' |- |Risk-Free Rate (10 year treasury yield) |4% |- |Expected Market Return (S&P 500) |10% |- |Market Risk Premium |6% |- |Beta (Yahoo Finance) |1.82 |- |E/(D+E) |94.88% |- |Cost of Equity |14.92% |- |WACC |8.94% |} {| class="wikitable" | colspan="2" |'''Implied Price Valuation''' |- |Sum of PV of FCF |9,221,753 |- |Growth Rate |3.00% |- |WACC |8.94% |- |Terminal Value |58,422,435 |- |PV of TV |38,070,647 |- |Enterprise Value |47,292,400 |- |Cash |4,835,000 |- |Debt |2,956,000 |- |Equity Value |49,171,400 |- |Outstanding Shares (K) |1,615,671 |- |Implied Price (USD) |30.43 |} Note from the below data table that, the decrease in WACC and the increase in growth rate are favourable to the implied price. It highlights that the stock's valuation is sensitive to changes in these key parameters, and small variations in either the WACC or growth rate can have a significant impact on the final estimate. This sensitivity should be taken into account when making decisions based on this valuation. {| class="wikitable" |+'''Implied Price''' ! colspan="2" rowspan="2" | ! colspan="5" |Growth Rate |- !2.0% !2.5% !'''3.0%''' !3.5% !4.0% |- ! rowspan="5" |WACC !7.94% | 31.32 | 33.70 | 36.56 | 40.06 | 44.45 |- !8.44% | 28.91 | 30.88 | 33.21 | 36.02 | 39.46 |- !'''8.94%''' | 26.84 | 28.50 | ''' 30.43''' | 32.72 | 35.48 |- !9.44% | 25.09 | 26.50 | 28.12 | 30.03 | 32.28 |- !9.94% | 23.56 | 24.77 | 26.15 | 27.75 | 29.61 |} __INDEX__
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