Opting for growth stocks can be akin to planting a seed with the hope of nurturing a mighty tree. These stocks, often rigidly tied to innovation and futuristic technologies, wield the promise of substantial returns, compounding over time a beacon of potential for vigilant investors.
Two such powerhouses, AMD and Etsy, emerge as prime contenders in the lucrative world of growth stocks, each hailing from distinct sectors, offering investors a route to diversification.
An Immortal Amongst Chips: Advanced Micro Devices (AMD)
AMD, the $236.8 billion semiconductor giant, has been unabashedly challenging the status quo in the chip industry, steadily carving out its own sphere of influence. With an awe-inspiring 4,215% surge in stock price over the last decade, AMD is positioning itself as a formidable force to be reckoned with. Even in the shadows of market dominator Nvidia, AMD has cast its own spell, etching out a story of resilience, exemplified by a staggering 127% stock gain in the previous year, towering over the Nasdaq Composite’s 43.4% ascent.
In 2023, AMD flourished on the back of the artificial intelligence (AI) frenzy, witnessing a steady resurgence in its data center business, with a consequential flat Year over Year (YoY) revenue of $1.6 billion in the third quarter. The company registered total revenue of $5.8 billion, marking a 4% YoY uptick, coupled with a 4% leap in diluted earnings per share (EPS) to $0.70 in the same quarter, towering over the consensus estimate.
The tentacles of AMD’s growth story extend far beyond consumer and data center domains, with the titan making notable strides in gaming consoles and other promising markets. As CEO Lisa Su puts it, the prospects of AI represent a “multibillion-dollar” growth avenue across cloud, edge, and a burgeoning array of intelligent endpoints, with strategic acquisitions like Nod.ai and Mipsology fortifying its AI capabilities.
With the launch of a bevy of AI-powered high-end processors following the Q3 surge, including the Ryzen Threadripper PRO 7000 WX-Series processors, Ryzen Threadripper 7000 Series processors, Ryzen 7045HX3D Series mobile processors, and the Ryzen 5 5600X3D processor for gaming, AMD’s growth narrative is nothing short of spellbinding.
Looking ahead, the prophecy of AMD’s growth trajectory remains robust, with analysts predicting a 17% year-on-year surge in revenue by 2024, an affirmation complemented by management’s estimate of fourth-quarter revenue hovering around $6.1 billion, along with adjusted gross margins potentially landing at 51.5% in Q4.
What Do Analysts Say About AMD?
The chorus of optimism surrounding chip stocks has been amplified by a slew of analysts at Stifel, KeyBanc, Bernstein, Mizuho, Truist, and others, each raising the target price for AMD stock this month. Wall Street, too, echoes this sentiment, with 24 out of 30 analysts endorsing a “strong buy” rating for AMD, underscoring the widespread confidence in the semiconductor titan’s unyielding ascent.
The Evolving Landscape of Etsy Stock
Etsy’s Unique Position in E-Commerce
Etsy, a thriving marketplace founded in 2005, has carved out a distinctive niche in the fast-paced world of e-commerce. The platform brings together creators, artisans, and buyers from around the globe and has transitioned from its origins as a venue for handmade and vintage items into a global marketplace serving a wide array of sellers and buyers.
The COVID-19 pandemic catalyzed soaring growth in global e-commerce, with Etsy emerging as a notable beneficiary of this trend. The company defied macroeconomic challenges, demonstrating robust growth amid the pandemic-induced constraints on consumer discretionary spending.
Impressive Financial Performance
In its most recent third quarter, Etsy exhibited resilience in the face of significant headwinds. The platform welcomed 6 million new buyers, propelling its consolidated gross merchandise sales (GMS) to $3.0 billion, marking a 1.2% increase. Notably, revenue surged by 7% to $636.6 million, underscored by the robust performance of Etsy Ads, payments revenue, and transaction fee revenue from Offsite Ads.
Remarkably, the company’s net income soared to $87.9 million, a stark contrast to the $963 million loss reported in the year-ago quarter. Furthermore, despite implementing a seller transaction fee increase from 5% to 6.5% in April 2022, active sellers on the platform surged by 19% in the third quarter, reaching 8.8 million.
Etsy’s unique business model, coupled with the continued shift towards online shopping, its emphasis on fostering a vibrant community, and its adaptability to market trends position the company optimistically for future growth. In a landscape where consumers are increasingly seeking unique and sustainable products, Etsy’s focus on handmade and vintage items resonates with evolving consumer preferences.
Although Wall Street doesn’t anticipate meteoric growth due to ongoing macroeconomic challenges, Etsy is poised for steady expansion, with projected increases of 5.4% in revenue and 3.8% in earnings for 2024. Notably, Etsy is trading at 15 times its forward 2024 earnings, a valuation lower than its historical five-year average price-to-earnings ratio of 55.
Analyst Sentiment and Projections
Wall Street analysts collectively designate Etsy stock as a “moderate buy.” Of the 27 analysts covering the stock, 10 rate it as a “strong buy,” two as a “moderate buy,” and 13 as a “hold.” Additionally, one analyst labels the stock a “moderate sell,” while another recommends a “strong sell.”
The mean target price for the stock stands at $85.58, reflecting a 20.4% upside from current levels. Meanwhile, the Street-high price target of $170 indicates an anticipated upside of 139%.