Investing in growth stocks can be like finding the proverbial needle in a haystack – lots of looking, hoping, and sometimes misplaced optimism. The term “growth stocks” often conjures up images of potential unicorns, yet they are not guarantees of success. However, two companies – Advanced Micro Devices (AMD) and Etsy (ETSY) – are presenting themselves as prime opportunities for optimistic investors.
AMD: The Underdog Making Waves
At first glance, Advanced Micro Devices (AMD) might seem dwarfed by its more famous competitor, Nvidia (NVDA). But don’t count AMD out just yet. In the last decade, the company’s stock has surged by an incredible 4,215%, showcasing its remarkable growth and potential. Last year, the stock gained a staggering 127%, outshining the Nasdaq Composite’s 43.4% rise.
Valued at $236.8 billion by market cap, AMD is challenging the dominance of its peers and progressively carving out a substantial share in the semiconductor space. The company’s innovative products and strategic moves have placed it on an impressive growth trajectory with promising prospects. In 2023, AMD’s fundamentals flourished, driven by the rush in artificial intelligence (AI).
The company’s total revenue reached $5.8 billion, marking a 4% year-over-year increase. Additionally, diluted earnings per share (EPS) surged 4% to $0.70 in the quarter, exceeding the consensus estimate.
According to CEO Lisa Su, AI represents a “multibillion-dollar” growth opportunity for AMD across various sectors. To integrate open AI software into its hardware, AMD made strategic acquisitions in 2023, including open-source AI software expert Nod.ai and AI software leader Mipsology.
The Path Forward for AMD
AMD’s growth is not confined to the consumer and data center segments; it has been making significant progress in other markets, including gaming consoles. Looking ahead, with the progress of AI, AMD’s growth prospects appear robust in the next few years. The continued demand for high-performance graphics processors in various sectors bodes well for the company. Management expects fourth-quarter revenue to be around $6.1 billion, in line with the consensus estimate.
Moreover, analysts predict a 17% year-on-year increase in revenue by 2024, showcasing a bright outlook for AMD’s future growth.
Analyst Sentiment
With the optimistic outlook for chip stocks, analysts at Stifel, KeyBanc, Bernstein, Mizuho, Truist, and others raised the target price for AMD stock. Wall Street has assigned a “strong buy” rating to AMD, with analysts envisioning a promising path ahead for the company.
Why Etsy Shines in the E-commerce Arena
While the pandemic has been disruptive for many, Etsy (ETSY) managed to shine and grow as a global e-commerce giant. Its journey from a niche marketplace to a significant player in the post-pandemic era is a testament to its resilience and adaptability. The company’s agility and innovation have firmly positioned it as a force to be reckoned with in the e-commerce landscape.
In conclusion, both AMD and Etsy present exciting growth opportunities for investors looking to tap into the potential of emerging markets. While their paths diverge across the semiconductor and e-commerce realms, their potential for substantial growth aligns with the ethos of long-term investment strategies.
The Enchanting Appeal of Etsy Stock
About Etsy
In the fast-paced world of e-commerce, Etsy has established itself as a unique and thriving marketplace, bringing together creators, artisans, and buyers from all over the world. Since its inception in 2005, Etsy has evolved from a niche platform for handmade and vintage items to a global marketplace serving a diverse range of sellers and buyers.
The COVID-19 pandemic fueled global e-commerce growth, and Etsy was no exception. Despite macroeconomic challenges affecting consumer discretionary spending, the company continued to exhibit robust growth.
Financial Performance
In the most recent third quarter, the company added 6 million new buyers to its platform. Etsy’s consolidated gross merchandise sales (GMS) saw a 1.2% increase to $3.0 billion, resulting in a 7% revenue surge to $636.6 million over the previous year. The growth in revenue was primarily attributed to Etsy Ads, payments revenue, and transaction fee revenue from Offsite Ads. Furthermore, Etsy’s net income recorded a significant increase, from a loss of $963 million in the year-ago quarter to $87.9 million.
Despite a seller transaction fee hike from 5% to 6.5% in April 2022, active sellers on the platform increased by 19% in the third quarter, reaching 8.8 million. The company’s growth prospects remain promising due to its unique business model and adaptability to market trends. As consumers seek out unique and sustainable products, Etsy’s emphasis on handmade and vintage items aligns well with these changing preferences. Wall Street, however, does not expect dramatic growth, projecting an increase of 5.4% in revenue and 3.8% in earnings for 2024. Etsy is currently trading at 15 times forward 2024 earnings, a lower valuation than its historical five-year average price-to-earnings ratio of 55.
Analyst Sentiment
Wall Street rates Etsy stock a “moderate buy.” Among 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 rates the stock as a “moderate sell,” while one analyst recommends a “strong sell.” The mean target price for the stock stands at $85.58, which is 20.4% above current levels, while the Street-high price target of $170 implies expected upside of 139%.