BofA 'Very Positive' on AMD's (AMD) Xilinx Deal, Reiterates Top Pick

BofA analyst Vivek Arya has weighed in positively on AMD’s (NASDAQ: AMD) acquisition of Xilinx (NASDAQ: XLNX).

Xilinx can help Plus AMD to accelerate its penetration in markets like comms infrastructure, where they historically did not participate.

The analyst outlines 4 key positives concerning the acquisition:

1) Expands AMD’s TAM from $80bn to $135bn including data center from $35bn to $50bn, with stronger position in the $29bn embedded (auto, industrial, comms) market;

2) Improves AMD’s scale and ability to compete against large competitors with ~$5.8bn in R&D (in NVDA range) growing 15-20% annually;

3) Potentially immediately accretive to non-GAAP GM, non-GAAP EPS, and FCF this year;

4) Xilinx proven share gain against Intel’s programmable system group (Altera).

“AMD will reflect Xilinx revenue contribution in the new Adaptive & Embedded Computing Group (AECG) which will also include AMD’s embedded biz (we est. $260mn in sales in 2021). For Xilinx, we see potential for ~15% YoY sales growth (85-90% will contribute to AMD in 2022) which is ahead of Street 13% but assumes pent up demand (awaiting deal closure) as well as revenue synergies (which could start as early as Q1). We now see combined 2022 sales of $25.2bn, up 17% from $21.5bn we had prior,” Arya said in a client note.

Overall, the analyst reiterated a Buy rating and a top compute pick on AMD as the company remains “well positioned to take share vs. Intel in the large/growing $70bn CPU market, where they are currently underrepresented (15% share) despite a solid product portfolio and consistent roadmap.”

​By Senad Karaahmetovic | [email protected]

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