Advanced Micro Devices (AMD) stock touched a new high of $45.62 on Monday. At this price, the stock also reached its 19-year high. AMD stock closed the trading day at $45.46 and gained 2.97% on December 23.
AMD stock is trading 0.4% below its 52-week high of $45.62. The stock is trading at 183.6% higher than its 52-week low of $16.03. At Monday’s closing price, AMD’s market capitalization stood at $53 billion.
On a year-to-date basis, AMD has gained around 146.3%. In comparison, the S&P 500 and the VanEck Vectors Semiconductor ETF (SMH) surged about 28.6% and 62.8% year-to-date, respectively.
AMD stock has been gaining steam since October, owing to its current lineup of chips. Recently, AMD stock has also caught the attention of several analysts and investors.
So, what are the trends signaling? Should investors go long on AMD stock amid its favorable upcoming products? Let’s look into the factors affecting AMD’s stock price.
AMD’s upcoming products and CPU market share
AMD has been gaining strength from its robust product offerings and its competitive positioning relative to rival Intel (INTC). The semiconductor giant also posted an exceptional third quarter at the end of October. Although AMD gave a weak revenue outlook, investors were impressed with the company’s progress.
AMD CEO Lisa Su stated during the earnings call that the company had achieved its “first full quarter of 7nm Ryzen, Radeon and EPYC processor sales drove our highest quarterly revenue since 2005, our highest quarterly gross margin since 2012 and a significant increase in net income year-over-year” in Q3. Moreover, Su is optimistic about the company’s progress and foresees growth for 2020 and beyond.
AMD recently launched its Radeon RX 5500 XT GPU (graphics processing unit) for mainstream gamers. This GPU would compete with Nvidia’s (NVDA) GeForce GTX 1650 SUPER GPU. AMD’s 7nm Navi-based GPU (Radeon RX 5700) is performing well in the gaming segment. Plus, AMD might release two new graphics cards—Navi 21 and Navi 23 in 2020. The new GPUs are known as the “NVIDIA killers.”
AMD is also gaining space in the CPU market share with its 7nm EPYC processors in comparison to Intel. Su believes that its EPYC processors have been the highest performers in the server CPU industry and that many AMD chips are better designed than Intel’s comparable chips. AMD’s Zen and Zen 2 chip designs are considered architecturally better than Intel. AMD’s EPYC Rome CPU was also more powerful and less costly than Intel’s Xeon Cascade Lake Platinum 8280.
Further, the company is set to see growth in 2020 on the back of its customer momentum and products.
Trade deal to benefit AMD stock
The progress in the trade deal between the US and China is also a positive signal for chip stocks. Notably, semiconductor stocks are sensitive to the trade war, and the Huawei trade ban has severely hurt revenues. Recently, the US and China have eased the trade war with the phase one agreement.
According to this preliminary trade deal, the US canceled its plans to place tariffs on Chinese goods worth $156 billion. In exchange, China had agreed to buy additional US goods and services worth $200 billion over the next two years.
Last Sunday, China also agreed to reduce tariffs on over 850 imported products, including frozen pork and avocados. On December 23, CNBC reported that these tariffs would be reduced on January 1 and would boost China’s imports.
Analysts also prefer AMD stock
Last Tuesday, Piper Jaffray lifted its price target to $40 from $35. Piper Jaffray analyst Harsh Kumar has retained a “neutral” rating on the stock. Piper Jaffray believes that AMD is well-positioned to benefit from Intel’s chip-supply issues. Intel started facing supply issues related to its 14nm (nanometer) and 10nm processor chips since September 2018. According to a December 17 report by TheStreet, Kumar believes that AMD “appears to be incrementally improving” related to Intel.
On Friday, Wedbush analyst Matt Bryson also boosted AMD’s price target to $51.50 from $39.00, as reported in The Fly. Bryson maintains an “outperform” rating on AMD and expects the company to gain a higher market share over the next two years. Bryson appears confident about AMD’s November launch of Threadripper.
Last month, Wells Fargo analyst Aaron Rakers turned bullish on AMD and expected gains in the server chip market. Recently, Rakers also lifted his price target to $270 on Nvidia stock while maintaining an “overweight” rating.
Susquehanna has a positive outlook on AMD’s growth prospects from Taiwan Semiconductor Manufacturing (TSM). Susquehanna analyst Mehdi Hosseini believes that AMD’s market share would gain from its latest lineup of chips. These trades suggest that AMD stock could rise further in the coming weeks. Similar to AMD, Susquehanna also upgraded its ratings and price targets of Micron (MU) and Western Digital (WDC) stocks.
Projected growth rate
Wall Street analysts expect AMD stock to recover in fiscal 2020 on a favorable chip market and a robust portfolio. Analysts expect AMD’s earnings to increase 35.2% YoY for 2019. Last year, its earnings grew over 100% in 2018. For 2020, analysts expect AMD’s earnings to rebound and grow over 76.6%.
Wall Street analysts expect AMD’s sales to increase only 3.6% YoY for 2019 versus growth of 21.5% in 2018. Analysts further predict sales to grow 26.8% YoY in 2020.
Analysts’ recommendations on AMD stock
Wall Street analysts gave a 12-month target price of $37.77 on AMD stock. The average target price stands at a 16.9% discount to its December 23 price of $45.46. Of the 40 analysts covering AMD, 15 analysts gave it a “buy” rating. Twenty-three analysts gave “hold” ratings on AMD, and two analysts gave “sell” ratings on the stock.
Reading the technical levels
AMD’s 14-day RSI (relative strength index) score is 75.21. This indicates that AMD stock is in “overbought” territory. An RSI index above 70 indicates that AMD stock is “overbought.”
On December 23, AMD stock closed near its Bollinger Band upper range level of $44.69. This value denotes that AMD stock is overbought.
AMD stock closed at $45.46 on Monday. Respectively, the stock was 11.5%, 21.8%, and 34.5% above its 20-, 50-, and 100-day moving averages of $40.77, $37.33, and $33.79. Because the price is above the moving average, the trend for AMD stock is upward. The technical indicators signify that the company is overbought at its present level.