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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?
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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.
Su also is responsible for a potentially transformative acquisition. 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.
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.
Intel Losing Market Share To AMD
In the first quarter, AMD took market share from Intel in CPUs for servers and notebook PCs, according to Mercury Research. But it lost ground in desktop PCs as it prioritized higher-margin products amid supply constraints.
AMD’s unit share of the lucrative server CPU market rose to 11.6% in the first quarter, up from 8.9% in the year-earlier period.
AMD’s share of notebook PC processor sales was 22.5% in the March quarter, up from 18% a year earlier.
However, AMD’s unit share of desktop PC processor sales was 18.3% in the first quarter, vs. 19.3% in the same quarter a year earlier.
Advanced Micro Devices News: Desktop CPUs
During the Computex trade show on May 23, AMD introduced the company’s new Ryzen 7000 Series desktop processors. The chips are based on its Zen 4 architecture and 5-nanometer process technology. They will launch this fall.
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.
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.
AMD Fundamental Analysis
Late on May 3, AMD reported better-than-expected first-quarter results and guided higher for the current quarter and full year. AMD stock jumped 9.1% on the news.
AMD earned an adjusted $1.13 a share on sales of $5.89 billion in the March quarter. Analysts polled by FactSet expected AMD earnings of 91 cents a share on sales of $5.01 billion. On a year-over-year basis, AMD earnings surged 117% while sales increased 71%.
AMD’s first-quarter results included partial-quarter results from the recently completed acquisition of Xilinx. Excluding Xilinx, AMD sales rose 55% to $5.33 billion.
For the current quarter, AMD forecast revenue of $6.5 billion, up 69% year over year. Analysts had been looking for $5.14 billion.
For the full year, AMD now expects revenue of $26.3 billion, up 60% over 2021. It previously guided to sales growth of 31%. Wall Street had predicted $21.48 billion in sales.
The next potential catalyst for AMD stock could be the company’s financial analyst day, scheduled for June 9.
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. It ended the regular session June 8 at 101.90.
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.
AMD stock has a decent IBD Relative Strength Rating of 75 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 a respectable IBD Composite Rating of 88 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 well below its 200-day moving average line. However, it recently rose above its 50-day moving average line.
The IBD Stock Checkup tool ranks AMD fourth among 34 stocks in IBD’s fabless semiconductor industry group. The fabless chipmaker group ranks No. 152 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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