Until early March, Advanced Micro Devices, Inc. (NASDAQ:AMD) stock was in a bearish phase. Part of this had to due with the market volatility as well as worries about competitive threats from mega rivals like NVIDIA Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC).
But during the past three months, AMD stock has come roaring back, going from $9.55 to $15.25.
Yet it is not uncommon for there to be a bullish spurt. And unfortunately, often the momentum will eventually cool down.
So what now for AMD stock? Well, as seen with the recent news from the company, the strength has come from some strong fundamental developments. Note that during the latest quarter the revenues jumped 40% to $1.65 billion.
AMD Stock and the EPYC Processor
Then again, AMD has continued to innovate at a furious pace, with offerings like Ryzen CPUs and Vega GPUs. But perhaps the most salient part of the portfolio is the EPYC processor.
This processor is focused on the huge datacenter market, which is dominated by INTC. The EPYC processor provides high compute performance and an advanced feature set in a single-socket platform, which allows for AI (Artificial Intelligence), advanced cloud computing and big data analytics.
Back in December, AMD announced that companies like Baidu (NASDAQ:BIDU), Microsoft (NASDAQ:MSFT), Dell (NYSE:DVMT), Hewlett Packard Enterprise Co (NYSE:HPE) and Tencent Holding/ADR (OTCMKTS:TCEHY) had adopted the technology.
And the good news for AMD is that the company continues to snag new customers. One of the most notable is Cisco Systems, Inc. (NASDAQ:CSCO), which is a first-time customer. Note that the company is using EPYC chips to create a new rack server.
According to a Cisco blog: “Why EPYC CPUs for the C125 M5? For dense environments, performance per watt is a key metric. EPYC processors offers the most cores with lower power consumption than other offerings making it an ideal choice for a multinode server.”
Yes, this is a powerful reference. And it seems like a pretty good bet that Cisco will not be the only new customer in the coming months.
Wall Street analyst are also taking note. Just look at Stifel’s Kevin Cassidy. Recently he upgraded his AMD stock target from $14 to $17, noting: “We see end demand forecasts for PCs, servers and graphics add-in-cards as increasing. 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.”
Bottom Line on AMD Stock
When AMD’s Lisa Su took the helm of AMD in late 2015, the situation looked hopeless. There was even buzz that the company would eventually have to sell out or even declare bankruptcy!
But Su has done a tremendous job as CEO. If anything, she has become one of the top leaders in tech. It certainly helps that she has a strong technical background.
Keep in mind that Su holds a bachelor’s, master’s and doctorate degrees in electrical engineering from MIT. She has also authored over 40 technical papers. In light of all this, it should be no surprise that Su has been strong in developing cutting-edge technologies that resonate in the marketplace.
Now it’s true that AMD is a bit pricey right now. Consider that the forward price-to-earnings multiple is at 26X.
Yet a premium is deserved. Again, the company is growing at a rapid pace and has a strong pipeline of offerings for key parts of the semiconductor value chain – that is, CPUs, GPUs and datacenter chips. In other words, for investors looking for a long-term play, AMD still looks attractive.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
