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hey how's it going everyone my name is Amos and welcome back to the dividend Compounders show so right now we're going to be looking at broadcom in one single month they are up by 36% just shy of it please don't be a wise guy and I want to tell you that I'm a special type of stupid that used to be an investor of broadcom but I sold after getting a 100% rate of return and when I made that transaction it was in the beginning of the pandemic somewhere like right here I bought it for about like $26 a share prior to the stock split and then I sold it at around like right there and I was like dude I'm so smart little did I know how much further it would go up but hey they say profit is profit and you're right I should be happy that I walked away in the green however on the other hand if you are currently bag holding Advanced Micro Devices AKA AMD who is currently negative 8% year to date then your butthole is probably sweaty as it's flirting with a new 52- we low I think the lowest was $121 right now they're $126 and you're wondering is the stock going to drop even further and if it helps you to sleep at night let me tell you a little something about myself I a value investor that just bought into AMD because I think that it's undervalued so if a Warren Buffett mindset of a guy likes AMD you're probably in Good Company unless of course investing into AMD is like signing up for advanced money Destroyer as they say but hey in this video I'm going to present my case as to why I'm choosing to buy AMD and not shares of broadcom ticker simple avgo unless you're delusional like the kind of guy that walks around telling everyone that they're 6 foot when deep down inside on a good day you're really 5'7 think we just all agree that broadcom is an amazing company because check this out their adjusted stock price Total return because performance matters in the one single year you would have gotten back 109% if we zoom out to 5 years then the total return is 700% and if we go back even further for 10 years then the total return for broadcom is 2800% that's Bonkers that's crazy money the funny thing is broadcom was always known as a wireless chips company that possessed a ton of patents and designs for mobile devices they're kind of like Qualcomm back in the day and when I say back in the day I'm talking like 3 to four years ago and when they did that they were a solid company with reliable operations and they had one of the best dividend profiles out there and as we saw their stock performs pretty well but ever since broadcom made this pivot into Ai and data centers their growth story has taken three steroid syringes into their left butt cheek because check this out they recently posted their earnings and it was nothing short of crazy their revenue grew by 51% year-over-year of which AI Revenue Rue grew 220% year-over-year so they posted $14 billion in just 3 months no we're not talking about Apple or Google or Tesla we're talking about broadcom and they also hiked their dividend by 11% year-over-year so for you dividend investors out there they got that covered and some analysts are even predicting and casting a forecast that broadcom's AI chips are going to see Revenue growth of 40% year year over-year until 2029 that's pretty wild so the investing thesis for broadcom super bullish and as a result right after their earnings the stock price has taken a flight to the moon and if you don't get it by now Wall Street is absolutely bullish ON Semiconductor companies that are in the business of AI other categories of semiconductors maybe not as much with Intel's unreliable Foundry progress right they're trying to make that pivot from being a CPU guy to now saying hey we'll make your chips why don't you just trust us over TSM like dude you're delusion and on a side note Intel is taking this All or Nothing gamble of a risk I don't think is going to work out for them because they don't really have the blueprint to do what TSM is doing they're trying to Pivot into an entirely different new category all that to say the intellectual property of AI chips and the designing of it is seen as more bullish than the ones who are trying to physically make those chips does that make sense and that's why when we consider TSM they have an economic mode of production and operations and supply chain that Intel just cannot emulate they can try but they're going to burn billions of dollars trying to do what TSM is able to do but anyways the argument that I'm trying to make is that the ones that are designing AI chips are making more money than the ones that are making them case in point look at Nvidia year-to date they are up by 178% and before you think the market is being irrational with broadcom and overpricing it dude their finances fundamentals and balance sheet is so amazing check this out first off we're going to be looking at their income statement when we take a look at their revenue what investors refer to as a top line look at the growth of it from the pandemic of 2020 onwards in 2020 they posted $23 billion okay that's cool but as we fast forward look at this this past year they posted $51 billion which means in the span of four years they have doubled their Revenue however with that said when we take a look at their balance sheet right now they have $9.3 billion of cash and cash equivalents on hand sounds good sounds fine however when we look at their debt picture it looks kind of ugly as we scroll down right here the total debt right now is $ 67.5 billion a debt that is alarming and that is a red flag in my opinion which means when you look at their net cash to debt ratio they are 58 billion of cash meaning they have a lot more debt than cash on hand however when we look at their cash flow statement and the free cash flow it is beautiful so it's kind of like they thr you with something ugly and then they give you something pretty it's like when you're dating someone who is really skilled with their makeup they're pretty when they're doed up but as soon as everything comes off it's someone entirely new and that's what we're seeing with broadcom their debt picture looks ugly but their free cash flow situation phenomenal in 2020 they posted $ 11.5 billion of free cash cash flow and then year-over-year it grew by 15% and then it grew by 22% uh 8% 10% and now for the trailing 12 months $19.4 billion of free cash flow so all in all I would say their cash situation kind of overrides their high debt because when it comes down to it if they really need to they can spend a majority or a bulk of their cash to pay off their debt in 3 to four years if they really had to do that but I don't think they're going to do it because they're going to investing that cash instead into R&D into recruiting the best engineers and scientists and coders around the world and to sustain their dividend which as of right now is a 1% dividend yield meaning for each share of broadcom that you own you get $236 a year in dividend a payout ratio of 44% which means it's healthy sustainable and they can increase it even further and for the past 5 years they have been growing this number by 14% year-over-year however as of right now now they only grew it by 11% so after taking into consideration broadcom's financial situation and fundamentals if you disagree with me it makes perfect sense broadcom is heavy in cash they pay a dividend they have wide margins and some analysts are even arguing that broadcom is now number two in the AI race and will give Nvidia a run for their money so I get it there's a lot to like about this company however on the other hand when we take a look at AMD AMD was always known as a PC chips company and was seen as the little brother that's a little ugly to Intel however they're making the same pivot to making chips for all things related to AI unfortunately for AMD the market is not as bullish towards AMD because of their message and communication but also of what they're doing their market share in the data center GPU and CPU not looking too good to Nvidia however I made a deep di video about AMD a couple days ago so watch that one for the full picture and why I would buy into AMD knowing that they're second to Nvidia but keeping that in mind yes year-to date or the one-year performance trash right negative 8% meaning your money would have gone down if you would have invested into AMD in December of last year and if we zoom out to I don't know three or five I guess we'll go with five to 5 years out then the total performance for AMD stock is 200% and if we zoom out even further Birds ey view is the company doing okay 10 years then your money would have grown by $5,000 per and that's because Lisa sue the current CEO who took over in 2014 literally took this company that was trading for about what $2 a share and now it's currently trading for about $126 a share so historically and in their DNA they have been a hyper Growth Company that is currently going through the smallest of speed bumps and bearish sentiment which is unusual for a company that has been seeing gains such as 5,000% in 10 years but I think this is also true when it comes to other things in life what is hot and what is in right now usually goes through cycles and waves meaning AMD was the hot girl two to three years ago but as of right now broadcom is the one that is walking around with the biggest and juiciest butt chin and pointy elbows meaning broadcom as of right now they're currently flirting with two to three hyperscalers without a concrete contract but Wall Street is eating it up broadcom was like hey guys we're talking to these people people and we think it's going to go well in the future so Wall Street is baking in bullish future expectations that those contracts are going to go in broadcom's way and that their revenue is going to multiply beyond belief because they're working with hyperscalers if you don't know what a hyperscaler is what you see on your screen right now on the right side think of it as a cloud-based data center customer when we think about like Amazon's web services uh Microsoft's aor Google's Cloud people that are building out data centers right now in order to meet the demand of their Cloud network if that makes sense and word on the street is that open Ai and apple are the two hyperscalers that are looking to use broadcom as a supplier of AI chips right that is insane because if we know anything about open Ai and chat GPT it's absolutely the hottest thing in the market right now like that one time you thought mullets looked good and so you grew your hair out and you walked around with a freaking mullet bro that is disgusting get rid of it so yes broadcom's future is looking pretty bright but I think about it like this for AMD this is the case for AMD right as Intel is pooping on themselves AMD is eating up the PC CPU market share and almost all of their data center CPU market share as well so if we consider their rapidly growing data center growth and how AMD is also taking away potential revenue from Intel this stock is undervalued right now I don't think the market is correctly pricing AMD so let's transition to the bottom line and give you my most compelling case for why AMD instead of broadcom between the two think about it the market is driven by hype in AI bullish fever right now right such as like all the cardio bunnies that bought a pelaton bike during the pandemic only to realize it's overpriced stationary equipment that's no different from the ones you see at Planet Fitness all I'm saying is if you really want to get a good workout in I dare you to sell your car and use a bicycle to commute everywhere use your own legs to get you to point A to point B that's what I did three and 1 half years ago and in the winters I regret it every day as my snot is running down my face anyways jokes aside when we take a look at broadcom and their stock price year to date they're up by 101% correct they have already skyrocketed how much further can it go in comparison to AMD that is beaten down and is ugly and is undesirable to the stock market AMD is basically hovering around their 52- we low case in point right now broadcom trades for about $224 a share and looks like in the pre-market it has gone up a little more so let's just go ahead and say it's trading for about $228 a share after broadcom posted their amazing earnings report all of the analysts that follow this company they actually revised their price targets for theany and broadcom is still too expensive meaning the average price Target from Wall Street analyst $28 a share broadcom is currently 224 as we scroll down check it out it's not just one or two or three guys these four and five star analysts the date of December 13th look at all these revisions right their price targets 250 from JP Morgan 225 from Jeff 255 from Benchmark as we scroll down look how many revisions there were and not a single one of them is putting a price target of like 350 or $320 or even $300 meaning broadcom is currently overpriced even according to the analyst on Wall Street at 228 a share with an average price target of 28 how much further can broadcom go on the other side when I think about AMD I think the upside is going to be much much higher for AMD I know it's bold of me to say that when year to date MD is down by -3% very bold of me however currently trading for about let's just go ahead and say 126 when we look at the forecast and the price targets from the analyst they're saying AMD should be worth $195 a share and what's Wild to me is that even the most bearish analyst on Wall Street is saying AMD is worth 155 they're currently 126 so even according to the guy who thinks AMD is not even all that even he thinks that AMD is undervalued meaning from their current trading price of 126 there's an upside of 54% in order to meet their average price Target don't get me wrong I'm not trying to discredit broadcom I think it's an amazing company however I think the uh ticket to get on the rocket ship to the moon for broadcom has already left however for AMD I think it's still docked in place and it's ready to shoot off and I'll make my final argument by saying this at amd's next earnings report that's going to be in early 2025 when Lisa Sue and AMD throws down some good news why can't AMD shoot up to the sky like broadcom just did the fundamentals of the company hasn't changed at all and the stock price is just going lower and lower because the market is shifting their money away from AMD and into Nvidia Marvel and broadcom they're taking that money from EMD and going into that side so what I think is happening right now I hate to be speculative but I think this is what's happening I think the market is just waiting for good or bad news to be reported from AMD and at which case AMD has the potential to just Skyrocket or to reach a new 52e low and drop down to like 110 a share to even $100 a share anyways if you haven't seen my AMD DD video then what are you waiting for go watch it otherwise I'm going to start sending you all the spoilers for the shows that are on your watch list that you have haven't seen yet jokes aside I love you stay safe if you like this kind of content subscribe if not I'll talk to you real soon peace
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