Advanced Micro Devices (AMD) rose 3.42% on Monday after a Wall Street analyst raised the target price on the stock. Notably, this is the second target price revision on AMD stock in less than a week. Some options traders turned bullish on AMD after analysts expected more upside in the stock.
Interestingly, the target price upgrades come after the semiconductor company reported in-line third-quarter results and disappointing guidance. On October 29, AMD met analysts’ earnings and revenue estimates in the third quarter. However, AMD forecasted soft revenues for the fourth quarter. Despite a weak forecast, the company had exceptional growth in the third quarter.
AMD stock closed the trading day at $39.88 on Monday. On a YTD (year-to-date) basis, the stock has risen more than 116%. In comparison, the S&P 500 has risen around 24.5% YTD. Nvidia (NVDA) and Intel (INTC) have risen 59.4% and 26.5%, respectively, on a YTD basis.
Analysts upgrade AMD stock
On Monday, Cowen raised its 12-month target price on AMD stock from $40 to $47. The new target implies a 17.9% premium on the stock’s closing price on Monday. According to a report from StreetInsider, Cowen raised the target price after meeting with AMD CEO Lisa Su. Cowen analyst Matthew Ramsay pointed at Su and said, “AMD’s consistent track record of execution under her leadership, and stable roadmap, is increasingly resonating with customers and investors.” According to the StreetInsider report, the analyst commented on Su’s leadership and AMD’s strong execution abilities. As a result, the analyst is bullish on the stock over the long term. Ramsay also reiterated the “outperform” rating on AMD.
On November 15, RBC Capital Markets lifted its target price on AMD stock. RBC analyst Mitch Steves raised his one-year target price to $50 from $44, according to a report from TheStreet. The target price is at a 25.4% premium on AMD’s closing price on Monday. The RBC Capital analyst believes in the company’s improving demand for data-center products. Steves thinks that AMD’s prospects are attractive in 2020, although they might be unclear in 2021. However, he maintained an “outperform” rating on AMD stock.
Overall, analysts are mainly neutral on AMD stock. Among the 40 analysts tracking AMD, around 43% recommend a “buy,” 55% recommend a “hold,” and only 2% recommend a “sell” rating. The mean target price of $35.33 implies an 11.4% upside from Monday’s closing price. The median target price was $35.00 on the same day.
Growth expectations ahead
Analysts expect AMD’s sales to grow 48.2% in the fourth quarter. The company expects Ryzen, EPYC, and Radeon product sales to drive its fourth-quarter revenues. However, analysts expect the company’s 2019 sales to only grow 3.7% YoY. AMD’s sales will likely improve significantly in 2020 with an increase of 26.8% YoY.
AMD’s stock returns
AMD stock closed 13.3%, 24.6%, and 25.2% above its 20, 50, and 100-day moving averages of $35.21, $31.99, and $31.86, respectively. Since the price is above the moving average, the trend of the stock is upward.
AMD’s 14-day relative strength index score of 85.68 indicates that the stock is highly overbought. Notably, an RSI level above 70 means that the stock is overbought. AMD’s upper, middle, and lower Bollinger Bands are $40.04, $35.21, and $30.38, respectively. The stock closed near its upper Bollinger Band on Monday, which indicates that the stock is overbought.
Looking at the technical levels, we think that investors should hold AMD stock even though the stock already had a big run. Analysts’ upgrades, despite the weak revenue guidance, signal that the stock has upside potential. We also think that the company’s upcoming product line-ups would deliver strong sales and earnings in 2020. Su expects the company to achieve strong growth in 2020 and beyond due to its customer momentum and products. AMD stock could also increase if the US and China reach a trade deal.