Advanced Micro Devices (NASDAQ:AMD) is currently trading for $14.60 per share, a level last seen in March 2017. Shares of AMD stock climbed steadily from early 2016 to early 2017 before hitting near that mark and beginning to zigzag mostly lower.
One catalyst for AMD stock’s recent return to its highest point in a decade was the fact that tech giant Cisco (NASDAQ:CSCO) unveiled new services that include AMD EPYC processors. As ZDNet pointed out, Baidu (NASDAQ:BIDU), Microsoft (NASDAQ:MSFT), and Dell (NYSE:DVMT) have all announced products and services powered by EPYC since last December.
On top of that, in mid-May, Susquehanna upgraded AMD from negative to neutral. And more recently, a bullish Stifel analyst upped his price target on AMD stock to $17 from a previous goal of $14. Kevin Cassidy, the Stifel analyst, in fact cited the EPYC processor, saying that Cisco’s use of them was proof that traction and market share is and will continue to be gained.
“We see end demand forecasts for PCs, servers and graphics add-in-cards as increasing,” Cassidy wrote. “We believe AMD’s EPYC server CPU is winning server designs and AMD’s broader PC CPU offering will allow AMD to outperform the market.”
The question is whether that traction is already built into the stock price. The average price target for Wall Street is just below the stock’s current price. Are analysts, as a whole, just slow to catch up?
This year, AMD earnings are slated to grow by 30% on 26% sales growth. AMD has managed to beat Wall Street’s consensus in each of the last three quarters. Longer-term — over the next five years — though, the estimate is more or less flat, with sales growth slowing to 6% next year.
Also, 22% of the float is sold short, which tends to raise the question of how much gains can be attributed to positions being covered.
Bottom Line on AMD Stock
Taking all these factors into consideration, I still believe AMD stock has some long-term upside. The company has decent fundamentals. Its assets outweigh its liabilities; its operating income was in the black last year for the first time in a bit. And AMD has broken through resistance at the $14 mark. It has momentum from deals with big-name companies and bullish analysts.
Given that backdrop, I believe investors will invest more positively than usual to strong growth this quarter. I also believe that estimates will catch up to the increasing popularity of AMD’s EPYC chips.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.