It’s not to suggest shares of Advanced Micro Devices (NASDAQ:AMD) will never move higher again. But, for the time being anyway, AMD stock has arguably climbed as far as it’s going to climb.
That’s not going to be a premise most fans and followers of the rebuilt company embrace. Aside from the well-established momentum that’s pushed the stock higher since late last year, Advanced Micro Devices just recently unveiled several next-gen products expected to drag the company even deeper into the black.
The fact that rival Intel (NASDAQ:INTC) is on the ropes and competitor Nvidia (NASDAQ:NVDA) has yet to fully answer the call only bolsters the bullish case.
The turnaround story is entering a new chapter though, and analysts are now tacitly saying where it’s going is less meaningful than where it is.
A Closer Look at AMD Stock
It’s a rarity for a stock to actually reach a consensus target. Far more often than not, the same improving fundamentals that drive a stock higher prompt analysts to up their forward-looking price targets, leaving most tickers perpetually chasing a carrot that always rests just ahead.
Despite the impressive turnaround CEO Lisa Su has led since taking the helm in 2016 the next leg of forward progress is going to be even tougher than the past progress has been.
The subtle clue of that looming reality lies not what in analysts have done, but in what they’ve not done. Despite room and reason to do so, the analyst community has refused to pump up their average price target any higher than its current reading of $30.18, even though AMD stock surpassed that level earlier this month.
This isn’t highly unusual for Advanced Micro Devices. The resurgence of the once-great company has captivated the masses, inspiring a similar scenario beginning in the middle of last year when the stock’s price blew past the then-target price and continued to widen that divergence for several weeks. That was also the shape of things beginning in April of this year, albeit to a lesser degree. Analysts have at least been willing to match the stock’s recent rise with their consensus target.
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If it looks and feels different this time though, that’s because it is. Then, even as the target price was rising, buy/sell ratings of AMD stock were falling, with the pros unsure of what to make of the matter. The pros weren’t entirely sure of what to make of it.
This time, the ratings are holding steady at just above a “Hold,” and the market’s willingness to not rush past the consensus suggests at least some investors are in agreement that the consensus target seems reasonable… even for this amazing turnaround story. They believe the turnaround was real. They just don’t like the price one has to pay to participate in it.
Analysts are quietly breathing a sigh of relief too, not feeling pressured to chime in with knee-jerk target increases only from fear of failure to make a profitable call.
And there’s the rub for newcomers. The turnaround story is running out of gas. It’s not likely to be a coincidence that the peak from early June is almost perfectly aligned with the peak from September. The charts, fundamentals, media, analysts all are working together in effect.
Looking Ahead for AMD Stock
Never say never. Right or wrong, the end of the trade could prove inspirational to all investors across the board. Should Intel announce another delay in the development of its next-generation chips, AMD benefits. Unless Nvidia comes up with a show-stopping product soon, AMD benefits. Some well-crafted enthusiasm could still pull a wave of new buyers into Advanced Micro Devices stock.
Such an outcome is arguably less likely than it was a year ago though, now that the turnaround story has been told in its full glory. There’s not a lot that’s new to keep such tremendous bullish pressure applied. From here, the company will be judged on its results rather than its potential or its trajectory.
It’s something that hasn’t been said of Advanced Micro Devices in a long, long time.
Analysts aren’t net-pessimists to be sure, but they clearly think the euphoria stage of the turnaround has run its course. The looming “show me” phase is a much tougher one.
As of this writing, James Brumley held no positions in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
