Advanced Micro Devices (AMD) stock surged to an all-time high late last year. But with a pullback in the chipmaker’s shares, some investors may be wondering: Is AMD stock a buy right now?
AMD has staged an amazing turnaround over the past seven years, fueled by new products and improved profitability. And AMD stock has climbed as a result.
AMD competes with Intel (INTC) in making central processing units, or CPUs, for personal computers and servers. It also rivals Nvidia (NVDA) in the market for graphics processing units, or GPUs, for PCs, gaming consoles and data centers.
Founded in May 1969, AMD went public in September 1972. AMD shifted to a fabless semiconductor business in March 2009 by spinning off its factories as GlobalFoundries (GFS).
Chief Executive Lisa Su Making A Difference
Current Chief Executive Lisa Su took the reins in October 2014. She shepherded the Santa Clara, Calif.-based company into a new era with its Ryzen PC processors and Epyc server chips in 2017.
Under her supervision, AMD jumped ahead of Intel in making CPUs at smaller node sizes, giving its products an edge in speed and performance. AMD is making chips at 6-nanometer scale, while Intel has struggled to make chips at 10-nanometer scale. AMD is now developing chips at 5-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
The situation has helped AMD take market share from Intel in PCs and servers. Those gains have buoyed AMD stock.
Chip foundry Taiwan Semiconductor Manufacturing (TSM) produces AMD’s chips.
Data Center Acquisitions
Su also has overseen several big acquisitions. On Feb. 14, AMD completed its acquisition of Xilinx in an all-stock deal worth $49 billion. AMD hopes to expand its presence in the data center market with specialty chips from Xilinx. AMD stock rose on the news.
Also, on May 26, AMD completed its $1.9 billion acquisition of distributed computing startup Pensando Systems. AMD says the deal will bolster its data center capabilities. AMD stock popped 6.6% that day.
On June 9, AMD touted its growing opportunities during an analyst day presentation. The company said its total addressable market is now $300 billion, vs. $79 billion at its 2020 analyst day.
AMD predicted improving profit margins and free cash flow as well as compound annual sales growth of 20% for the next three to four years.
Intel Losing Market Share To AMD
In the second quarter, AMD took market share from Intel in CPUs for servers and PCs, according to Mercury Research.
AMD’s unit share of the lucrative server CPU market rose to 13.9% in the second quarter, up from 9.5% in the year-earlier period.
AMD’s share of notebook PC processor sales was 24.8% in the June quarter, up from 20% a year earlier.
Also, AMD’s unit share of desktop PC processor sales was 20.6% in the second quarter, vs. 17.1% in the same quarter a year earlier.
Advanced Micro Devices News: Desktop CPUs
The next catalyst for AMD stock could be the company’s launch of its Ryzen 7000 Series desktop processors on Aug. 29. The chips are based on its Zen 4 architecture and 5-nanometer process technology.
At the CES 2022 consumer electronics show on Jan. 4, AMD introduced its latest central processors and graphics processors for notebook PCs, with a special emphasis on gaming applications. It debuted its Ryzen 6000 series mobile processors and new Radeon graphics processors. But AMD stock dropped 3.9% amid a rough day for tech stocks.
Late on Feb. 24, AMD announced a new $8 billion share repurchase program. The new authorization is in addition to the $4 billion stock buyback plan announced in May 2021, under which the company had repurchased about $3 billion of AMD stock. Investors applauded the news, sending AMD stock up 3.8% in the next trading session.
AMD Fundamental Analysis
Late on Aug. 2, AMD delivered a mixed second-quarter report. It posted better-than-expected results for the June quarter but gave soft sales guidance for the current quarter. AMD stock dropped 1.2% on the news on Aug. 3.
AMD earned an adjusted $1.05 a share on sales of $6.55 billion in the June quarter. Analysts polled by FactSet expected AMD earnings of $1.03 a share on sales of $6.53 billion. On a year-over-year basis, AMD earnings rose 67% while sales increased 70%.
For the current quarter, AMD forecast revenue of $6.7 billion, up 55% year over year. However, Wall Street was looking for sales of $6.84 billion in the third quarter.
For the full year, AMD expects to generate sales of $26.3 billion, up 60%. Analysts had predicted sales of $26.21 billion.
AMD Stock Technical Analysis
AMD stock sank to a nearly four-decade low of 1.61 a share in July 2015 before starting its epic recovery.
On Oct. 18, AMD stock broke out of a double-bottom base at a buy point of 114.59, according to IBD MarketSmith charts. It surged to a record high 164.46 on Nov. 30 before retreating. AMD stock tumbled during the stock market correction earlier this year.
AMD stock flashed a clear sell signal on Jan. 5 when it closed well below its 50-day moving average line, a key support level. It ended the regular session Aug. 26 at 91.18.
AMD stock has a subpar IBD Relative Strength Rating of 23 out of 99. The Relative Strength Rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
AMD stock carries an IBD Composite Rating of 75 out of 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Is AMD Stock A Buy Right Now?
AMD stock is not a buy right now. It needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD’s Big Picture column for the current market direction.
In a negative sign, AMD stock is trading below its 200-day moving average line and is looking for support at its 50-day line.
The IBD Stock Checkup tool ranks AMD as ninth among 34 stocks in IBD’s fabless semiconductor industry group. The fabless chipmaker group ranks No. 147 out of 197 industry groups that IBD tracks. IBD trading guidelines recommend focusing on top-rated stocks in leading industry groups.
To find the best stocks to buy or watch, check out IBD Stock Lists as well as IBD’s Leaderboard, MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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