Julie Lamb

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Julie graduated with a Bachelor of Arts in English with a focus on creative writing from the University of Louisville.

Billionaire Israel ‘Izzy’ Englander Takes a Massive Bet on Advanced Micro Devices (AMD), Big Retreat from Micron (MU)

One of Wall Street's most respected billionaires is making large waves in the semiconductor arena's leading giants, AMD and MU, as of the latest SEC filing.

Israel ‘Izzy’ Englander is the billionaire, chairman, CEO, and founder behind monster hedge fund Millenium Management, a firm managing more than $35 billion in assets. How did Englander kick off the year boasting a whopping net of $5.2 billion to his name, making him the 303rd wealthiest man in the world? Certainly not by falling prey to risks. Englander must size up a profitable opportunity in Advanced Micro Devices (NASDAQ:AMD), having ramped up Millenium’s stake in the chip giant to the tune of 1,312% higher. Yet, the same cannot be said for Micron Technology (NASDAQ:MU), which has seen the billionaire backtrack almost all of his fund’s shares in the semiconductor company.

Notably, Millenium prides itself on its worldwide multi-strategy investment approach, one where Englander’s trading teams opt for small-scale winning gains- and subdued losses. Mega gains do not entice Englander if those profits are tagged with the risk factor of steep losses. After all, the billionaire hedge fund guru thinks with the sharp mind of a savvy businessman- not just from the perspective of investing and trading. That’s precisely what helped Englander to score $1.15 billion in 2015 alone- and why this self-made entrepreneurial success is one of Wall Street’s most respected hedge fund managers.

Let’s dive in to see the trusted hedge fund guru’s key moves in the tech sector:

Advanced Micro Devices Entices a Bullish Hike- Over 6 Million Shares

AMD appears to have caught much more of Englander’s attention, according to the most recent SEC filing, where the billionaire’s fund fired up its position by 6,225,277 shares. Now, Millenium’s holding stands at 6,700,103 shares worth $67,336,000.

One of Wall Street’s best performing analyst seems to agree, as top analyst Matt Ramsay at Cowen recently joined the bulls on a company he sees as only just in the beginning of a gains-making narrative. Some investors are missing out on the bigger picture here in only paying attention to near-term results and the cryptomania factor of AMD’s story. Especially with a shift to 7nm products, the analyst predict AMD is poised to drive further momentum.

Worthy of note, the analyst has an Outperform rating on AMD stock with an $18 price target, which implies a 37% upside from current levels.

Ramsay underscores, “As Moore’s Law slows, we believe AMD’s 7nm products from TSMC should gain additional share versus Intel’s 10nm silicon in 2019/20,” giving kudos to stable product execution throughout PC, GPU, as well as server road maps. These have odds to bring to the table a substantial lift in gross margin targets, with Ramsay angling for a range of 40% to 44% against today’s 37%. Moreover, the giant’s stellar product execution stands to translate to meaningful upside to the AMD management team’s 2020 EPS target of $0.75, argues the analyst.

Glancing ahead to the back half of the year, Ramsay angles for a slew of 7nm products from TSMC following a full year of 7nm products ranging across the portfolio come 2019. Spotlighting a transition from the 14nm roadmap to 7nm in the next generation, Ramsay wagers AMD’s products may deliver a more robust performance as well as performance per watt, outperforming today’s 14nm offerings.

“Further, we anticipate these new 7nm products will compete with the 10nm road map from Intel in the PC and server markets during 2019/20. Given our view, corroborated by proprietary industry checks, that 7nm foundry silicon is roughly equivalent to Intel’s 10nm node in terms of realized performance/ density/power, we believe another significant shift in the competitiveness of AMD’s products versus Intel’s will take place in 2019, leaving AMD at process node parity with Intel for the first time in well over a decade,” continues the analyst, encouraged to see positive industry contact commentary with regard to the 7nm chips.

It’s not that the latest upside from blockchain and crypto has not been “nice,” explains the analyst, but rather those gains are simply not as “important” as investors might think down the line. Should blockchain-related sales suffer a sharp stumble in the sales mix in the back half of 2018, in the grander scheme, Ramsay recognizes a gaming growth offset ahead- as well as strength in datacenter GPU sales. AMD’s server road map is primed for “success” in 2018 and raring for a ramp in 2019 on back of 7nm products, which Ramsay expects could lead to over $1 billion in high-margin server sales annually by 2020.

Matt Ramsay has a strong TipRanks score with a 65% success rate and an impressive ranking in the top 100 of Wall Street analysts: #97 out of 4,801 analysts. Ramsay yields 24.0% in his annual returns. When recommending AMD, Ramsay earns 36.7% in average profits on the stock.

TipRanks suggests optimism circles overhead AMD shares. Consider that out of 18 analysts polled in the last 3 months, 10 are bullish on the chip giant, 6 remain sidelined, while 2 are bearish on the stock. With a healthy return potential of 16%, the stock’s consensus target price stands at $15.24.

Micron Is Not Looking Too Hot; Millenium Ditches Close to 9 Million Shares

Micron must be carrying a great deal more risk from where Englander stands, as the guru opted to practically jump out of his position in the chip giant. Millenium chopped its stake in MU a bearish 86% lower, selling off 8,883,902 shares. Now, the hedge fund owns 1,512,802 shares worth $78,887,000.

Top analyst Amit Daryanani at RBC Capital counters with a bullish case for the chip giant, rating MU an Outperform with a price target of $80, which implies a just under 32% upside from current levels. In fact, MU investors just had quite a good week, with the Micron board approving a $10 billion stock buyback plan and lifting the company’s third fiscal quarter outlook. With expectations to return a minimum of 50% of free cash flow to shareholders to kick off fiscal 2019 and a surprisingly good pre-announcement check, Daryanani is eager for “more to come” from this buzzing giant. Daryanani’s prediction: capital allocation is up next for Micron.

The MU team bumped up its third fiscal quarter outlook from $7.40 to $7.75 billion in revenue at the mid-point and has adjusted EPS at the mid-point up from $2.83 to $3.14. As such, commending the guidance raise for outclassing the tail-end of prior expectations, Daryanani adjusts his revenue forecast from $7.20 to $7.60 billion and EPS from $2.76 to $2.90.

Though MU has yet to provide “specific drivers of the strong performance,” the analyst pays attention to revenue upside compared to the prior guide circles 5% with EPS on a roughly 11% surge comparatively. In other words, the analyst believes, “GMs were likely strong, which could be on account of continued strength in DRAM ASPs, and better than anticipated NAND mix and yield improvements. While the pre-announcement checks one of our pre-analyst day expectations list, we think there is more to come.”

Daryanani anticipates Micron will deliver the following: “1) provide a capital allocation update reflecting buybacks once it gets to net-cash neutral level; 2) provide a framework to think through downside in trough cycle; 3) provide technology roadmap for both NAND (96L transition) and DRAM (1Y update); and 4) update capex for next year; we think $9–10B. Net/Net: We think longer-term the stock is on track for $8.00+ mid-cycle EPS enabling a price toward $80.”

In lieu of the encouraging pre-check, the analyst tweaks his prior forecasts, hiking his revenue projection of $7.4 billion up to $7.6 billion and his $2.83 EPS estimate to $3.14. For context, this is more bullish than the Street’s expectations before this pre-announcement calling for $7.48 billion in revenue from the giant and $2.85 in EPS. When assessing his full-year 2018 model, Darayani jumps his previous expectations of $29.3 billion to $29.9 billion in revenue and $10.94 up to $11.47 in EPS. Before the pre-announcement, consensus set expectations for Micron to deliver $29.3 billion in revenue for the year and $10.93 in EPS.

Keep in mind, this semiconductor leader is set to keep shareholders content, angling for a net-cash neutral position by the end of the third or fourth fiscal quarter and soaring free cash flow to realize over $8 billion, contends Daryani, who likes Micron’s opportunity to achieve a meaningful multi-year buyback program. The chip giant additionally has “limited inorganic initiatives” at play, and the analyst wagers the company will unleash a more than $5 billion buyback program throughout the period of three years’ time. Daryanani surmises MU can return around 25% in free cash flow to shareholders.

Amit Daryanani has a very good TipRanks score with an 86% success rate and one of the most stellar rankings on the Street: #14 out of 4,799 analysts. Daryanani realizes 27.1% in his annual returns. When recommending MU, Daryanani gains 0.0% in average profits on the stock.

TipRanks reveals a majority for the bulls when it comes to sell-side analysts’ opinion on the semiconductor leader. Out of 24 analysts polled in the last 3 months, 20 are bullish on MU stock, 3 remain sidelined, while 1 is bearish on the stock. With a return potential of nearly 28%, the stock’s consensus target price stands at $76.65.

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