AMD Stock Price Earnings
Source: AMD

AMD Stock Rises on Earnings Beat — Is It a Buy?

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On Tuesday, Oct. 27, AMD stock rose 2 percent in the pre-market trading session after the company released its third-quarter earnings results. AMD's third-quarter sales and earnings beat analysts’ consensus estimates. We'll discuss the company's third-quarter highlights and outlook.

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What is AMD’s stock news?

On Oct. 27, AMD agreed to buy competitor Xilinx for $35 billion in stock. The deal will likely close by the end of 2021 after receiving regulatory approvals. AMD also posted its third-quarter earnings results, which beat Wall Street analysts’ consensus expectations.

AMD Stock Price Earnings
Source: AMD
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AMD buys Xilinx for $35 billion

AMD has agreed to buy Xilinx for $35 billion in stock. Under the terms of the agreement, Xilinx shareholders will get 1.7234 AMD shares for each Xilinx share they own. The deal values Xilinx at $143 per share. The merger will likely close by the end of 2021. The agreement still needs approval from regulators and shareholders. China will also have to approve the deal. The deal will likely be immediately accretive to AMD's EPS, margin, and free cash flow generation.

AMD’s Q3 earnings results

In the third quarter, AMD reported an adjusted EPS of $0.41 compared to $0.18 in the third quarter of 2019. The adjusted EPS beat analysts’ average estimate of $0.35. AMD generated sales of $2.8 billion in the third quarter, which is 56 percent more than it did in the third quarter of 2019. The company beat analysts’ average sales estimate of $2.6 billion.

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AMD generated Computing and Graphics segment sales of $1.67 billion compared to analysts’ consensus estimate of $1.55 billion. The company expects consolidated fourth-quarter sales of approximately $3 billion—up 41 percent year-over-year.

AMD Stock Price Earnings
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What is AMD’s stock price today?

AMD stock was up about 0.4 percent at $82.57 in pre-market trading as of 8:54 a.m. ET on Oct. 27. The stock rose 0.3 percent on Oct. 26 and closed at $82.23 with a market capitalization of $96.5 billion. AMD stock has risen by 0.8 percent in the last five days and 149 percent in the last year.

AMD stock is trading 12.8 percent below its 52-week high of $94.28 and 156.7 percent above its 52-week low of $32.03. Year-to-date, the stock had risen by 79.3 percent as of Oct. 26.

What is AMD’s stock forecast?

Currently, analysts' stock price forecast for AMD is $80.79, which suggests a 1.8 percent downside. The highest target price of $120 implies a 45.9 percent upside, while the lowest target price of $9 suggests an 89.1 percent downside. Among the 31 Wall Street analysts tracking AMD, 11 recommend a buy, 15 recommend a hold, and five recommend a sell. 

It might not be the right time to buy AMD stock since it’s expensive. Long-term investors should wait for the stock to correct some before buying. The AMD and Xilinx deal will likely broaden AMD’s business into chips for markets like automotive electronics and 5G communications.

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