Shares of Advanced Micro Devices (NASDAQ:AMD) have been on a tear so far in 2019, up over 70% year to date. But to me, it seems like investors in have some things to consider.
I do not own this stock, but if I did these issues would concern me and I would probably sell it here.
Issues with AMD Stock
Click to Enlarge First of all, the last time that AMD traded at these levels back in September and October, sellers entered the market and drove it much lower. From the end of September through the end of October, AMD lost almost 50% of its value.
The stock recently ran into resistance at $32.50 and was unable to stay above it. AMD stock needs to push past that level, and so far it has failed to do so.
Second, the tech sector as a whole is testing resistance as well. If the Sector goes lower, it will probably take AMD with it.
Click to Enlarge The Technology Select Sector Spider (NYSEARCA:XLK) follows the tech sector. You can see here that they are currently testing the same resistance levels that sold off from in late April and early May.
The third thing that would concern me is AMD stock’s valuation verses the other members of its peer group. According the CNBC, AMD has the highest valuation in its group. The price-to-earnings ratio of AMD is 47. This is way higher than its peers. Analog Devices (NYSE:ADI) has a P/E ratio of 22. KLA-Tencor (NASDAAQ:KLAC) and Microchip Technology (NASDAQ:MCHP) each have price-to-earnings ratio of around 14. The last member of the group, Xilinx (NASDAQ:XLNX), has a P/E ratio of 29.
The fourth thing that I would consider bearish for the stock is the lack of insider buying.
I went back one year and I couldn’t find any significant insider buying. That worries me. After all, who knows more about what is going on insider a company than the insiders? If they don’t want to own their company’s stock then I don’t want to either.
And finally, the fifth thing that makes me want to sell AMD is actually the recent upgrade at Morgan Stanley.
Hear me out. On June 6, AMD stock was upgraded from underwieght to equal weight. “Being cautious on the stock has obviously been the wrong call, even though we were right on some aspects,” said Joseph Moore in a note on Thursday. That sounds positive, right? But what concerns me is that Morgan Stanley’s price target is $28. This is almost 10% below current levels.
Now, none of this is to say AMD absolutely can’t make gains here. It’s just that so many technical indicators look worrisome that I’d steer clear for now.
As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities.