Is AMD Stock a ‘Buy’ before Its Q4 Earnings?

Advanced Micro Devices (NYSE:AMD) stock fell 3.48% in the pre-market trading session today at 8:33 AM ET. The stock also fell 2.63% on January 24 and closed the trading session at $50.35. Notably, the stock was trading 4.7% below its 52-week high of $52.81 and 164.30% above its 52-week low of $19.05. At the closing price on January 24, AMD had a market cap of $56.1 billion.

What to expect from AMD’s earnings

On Tuesday, AMD is scheduled to release its fourth-quarter earnings results after the markets close. For the fourth quarter, analysts expect the company to report revenues of $2.1 billion, which implies a rise of 48.5% from $1.4 billion in the fourth quarter of 2018. For the same period, analysts expect AMD’s earnings to be $0.31 per share compared to $0.08 in the fourth quarter of 2018.

According to a Forbes report, “Weaker-than-expected earnings for FY 2019 will very likely result in AMD’s stock falling in price once earnings are announced.”

Analysts’ recommendations

About 40 analysts cover AMD stock as of today. Among the analysts, 22 recommend a “hold,” 16 recommend a “buy,” and two recommend a “sell.” According to analysts’ consensus, AMD stock has a mean target price of $43.33 and a current market price of $50.35, which suggests a downside potential of 13.9% in the next 12 months. The median target price is $41.00 today.

On Monday, Susquehanna analyst Christopher Rolland increased its target price on AMD stock to $50 from $45. Rolland maintained the “neutral” rating on the stock. According to TheFly, the analyst said, “The strong PC/DC backdrop should help AMD meet investor’s high expectations. He noted the Street expectations for Q4 are super-seasonal but new product ramps and a constructive PC environment should help them meet expectations.”

AMD stock’s valuation

Currently, AMD stock is trading at 44.71x its fiscal 2020 estimated non-GAAP EPS of $1.13. The stock is also trading at 32.95x its fiscal 2021 estimated non-GAAP EPS of $1.53. Analysts expect AMD’s earnings to rise at a compound annual growth rate of 45.0% in the next five years.

Technical level

Based on the closing price on January 24, AMD stock was trading 3.4% above its 20-day moving average of $48.71. The stock is also trading 15.1% above its 50-day moving average of $43.76 and 34.2% above its 100-day moving average of $37.51.

AMD’s 14-day relative strength index score is 6.7. The score suggests that the stock is approaching the “overbought” level. AMD’s upper, middle, and lower Bollinger Band levels are $52.22, $48.71, and $45.20, respectively. On January 24, the stock closed near its middle Bollinger Band level, which indicated that it isn’t overbought or oversold.

To learn more, read Can AMD Stock Rally more on Analysts’ Upgrades? and AMD Ryzen Threadripper 3990X Coming on February 7.