Once upon a time, chipmaker Advanced Micro Devices (NASDAQ:AMD) was the hottest stock in the market. That time wasn’t too long ago. From April to September 2018, AMD stock nearly quadrupled from $9 to $36.

Everyone thought that AMD had cracked the code in its fight with Intel (NASDAQ:INTC), and was going to steal significant market share over the next several quarters. FOMO (fear of missing out) kicked in, buyers rushed to the stock, shorts covered, and analysts upgraded.

Then, reality hit.

AMD reported third quarter numbers in October that, while good, didn’t support the huge rally the stock had staged from $9 to $36. Earnings topped expectations. Revenues missed. The guide was weak. And, next to AMD’s weak results, Intel reported really strong third quarter numbers.

Overall, recent results imply that while AMD is still doing well, the company isn’t stealing market share left and right, and Intel still remains king in critical secular growth markets.

AMD stock dropped. From a $35-plus high in September to $16 in late October.

That was a dip worth buying. In the mid-teens, AMD stock was undervalued considering its secular growth prospects through AI, IoT, and data-centers. But, now that the stock has bounced back to levels above $20, I think caution is warranted. Fundamentals imply $20 is a fair 2018 price target for this stock, while levels above $20 seem fundamentally stretched.

In the current stock market environment, fundamentally stretched valuations are unsustainable. As such, for the foreseeable future, AMD  looks like a stock you buy on big dips below $20, and sell on rallies back to $20.

AMD’s Fundamentals Are Good, but Not Great

AMD stock is supported by healthy long-term growth fundamentals. But, those fundamentals aren’t as robust as investors buying at $30 had hoped.

When AMD was trading above $30, investors were hoping that new products would spark AMD to rapidly steal market share from Intel. Specifically, the hope was that new EPYC chips would steal share from Intel in the secular growth data-center market.

This is happening. But, not quite at the robust rate investors were hoping for when AMD was $30. During the past quarter EPYC won major cloud contract deals with Microsoft (NASDAQ:MSFT), Dropbox (NASDAQ:DBX), Xilinx (NASDAQ:XLNX) and Oracle(NASDAQ:ORCL).

Those are some nice additions. But, data-center GPU sales rose at just a double-digit rate during that quarter. That is good, but not great. By comparison, Intel’s data-center revenues rose 26% last quarter.

Thus, it is safe to say that Intel’s data-center business and AMD’s data-center business grew at similar rates last quarter. That doesn’t imply robust market share expansion for AMD. It implies that both AMD and Intel are growing side-by-side in the secular growth data-center market.

This is how things will persist for the foreseeable future. AMD will be characterized by gradual share expansion in secular growth markets. But, hopes and dreams of huge market share expansion for AMD are just that: hopes and dreams.

As such, AMD stock is supported by good fundamentals. Secular tailwinds in the AI, IoT, and data-center markets support healthy revenue and profit growth at AMD, But, they won’t catalyze huge revenue growth, and they won’t push the stock back to $30 any time soon.

The Stock Is Fairly Valued at $20

Roughly speaking, the global semiconductor market has gone from $10 billion in revenue per month in 1996 to $40 billion in revenue per month today.

That represents a trailing, 22-year compounded annual growth rate of roughly 6.5%. Secular trends in cloud migration, IoT development, AI improvements, and smartphone proliferation support healthier-than-usual adoption rates going forward for GPUs, CPUs, and all semiconductor equipment.

Thus, over the next several years, I think it is reasonable to project 10% annual revenue growth for the global semiconductor market.

Given AMD’s new line of products and the successful ramp of these products, I think it’s also reasonable to assume that AMD’s market share will gradually expand over the next several years. Thus, if the global semiconductor market grows at a 10% annual rate over the next five years, I think it’s reasonable to estimate that AMD’s annual revenue growth rate can reach 15% – 20%.

During that stretch, AMD’s gross margins should continue to improve thanks to higher average sales prices and entry into higher-margin markets, while double-digit revenue growth should drive healthy operating expense leverage. All together, then, AMD will be a company with 15%-plus revenue growth potential on top of healthy margin expansion potential over the next several years.

These reasonable growth assumptions give visibility to EPS of $1.50 by fiscal 2023. After placing a forward price-earnings multiple of 20 on AMD, which is average for growth stocks, and discounting back by 10% per year, we are looking at a fiscal 2018 price target of just over $20.

In today’s market, fundamentally stretched valuations are unsustainable given global growth concerns. Thus, AMD stock is a buy on big dips below $20, and a sell on rallies above $20.

Bottom Line on AMD Stock

AMD  hit a brick wall called reality in October, and shares have appropriately normalized lower ever since. But, this stock still has tremendous long-term growth prospects, and those growth prospects support a $20 price tag for the stock.

Dips below this level are buying opportunities. Rallies above it are selling opportunities.

As of this writing, Luke Lango was long INTC.