AMD’s stock price momentum
Previously, we saw that Advanced Micro Devices (AMD) is delivering a strong return on equity due to its investments in new products. The company’s returns could improve further this year if it gains some of Intel’s (INTC) share of the server CPU[1.central processing unit] market. AMD’s high returns amid semiconductor market weakness have made investors and analysts bullish on AMD.
Last year, AMD stock outperformed peers Intel and NVIDIA (NVDA) and the S&P 500 (SPY) and VanEck Vectors Semiconductor ETF (SMH) by huge margins. AMD stock rose 79.6%, while the S&P 500 and SMH fell 6.2% and 10.8%, respectively. However, AMD was hit harder in the fourth-quarter sell-off—its stock fell 40%, and the S&P 500 and SMH fell 14% and 18%. Whereas AMD stock fell to $17 at the end of December from ~$30 at the end of September, it was above its trading price before June, indicating that the overall sentiment is still bullish.
AMD’s steep price movement gave it a beta of 5.09, while NVIDIA’s and Intel’s betas were 2.65 and 0.82, respectively. Betas measure volatility, with 1.0 representing the market’s movement and a beta greater than 1.0 indicating a stock is more volatile than the market.
Analysts’ take on AMD
In September, when AMD stock was trading at a 12-year high of above $32, analysts upped their bullish price target for the stock from $27 to $40. They maintained their median price target of $24.50 and bullish target of $40, even after the stock rallied in the fourth quarter. They seem optimistic that the fourth quarter’s downtrend is short term and that AMD will return to growth.
If AMD hits its median price target of $24.50, the stock could recover from its downtrend. However, the stock could dip at the end of January as investors react to AMD’s fourth-quarter results.
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