The first time I weighed in on Advanced Micro Devices (NASDAQ:AMD), I said, “As long as AMD can expand as well as it already has, the stock could see further upside.”
That was on Oct. 7, 2019, as the AMD stock traded at $28.90. Since then, Advanced Micro Devices has exploded to a high of $59 a share.
Granted, markets are a slow-motion disaster at the moment with the novel coronavirus, tensions with China and nearing U.S. elections, but there’s further upside for the AMD stock.
Here are four reasons why I think AMD stock could hit $75 later this year.
1. New Gaming Consoles Are Likely to Boost AMD
Even with the coronavirus making life “fun,” it won’t delay console launches.
In fact, Sony Interactive (NYSE:SNE) CEO and President Jim Ryan confirmed, “We’re going to launch this year, and we’ll be global.” Microsoft (NASDAQ:MSFT) will launch its new consoles by Nov. 2020.
Of course, new gaming consoles means better experience for players, better graphics, higher speeds. All of which is great news for Advanced Micro Devices. That alone should easily boost the company’s revenue this year.
Plus, according to Northland analyst Gus Richard:
“In our view, AMD is well position for 2H:20 as new game consoles launch for the holiday season, and server market share gains accelerate as Milan ramps in Q4. Moreover, we believe these products are relatively immune if the macro weakens.”
He has a near-term price target of $67.50.
2. Working at Home is the New Norm
With new coronavirus cases, and hospitalizations only increasing, states are rethinking their reopening plans. In fact, Texas Gov. Greg Abbott just paused reopening to get the spread under control. New York, New Jersey and Connecticut set quarantines for incoming travelers.
With more states likely to follow suit, working at home is likely to become the norm for quite some time. As a result, companies like Zoom Video Communications (NASDAQ:ZM) could see an incredible boost in demand for teleconferencing again. For that to happen, Zoom will need far more data center space to handle the surge.
That, in turn, would lead to big demand for data center chips from Advanced Micro Devices. Plus, according to Goldman Sachs analyst Heather Bellini, “due to Covid-19, more organizations are reliant on communication tools that allow their remote workforce to collaborate effectively.”
3. AMD Could See Big Demand for Cloud-Computing Services
Again, with the coronavirus, we could see companies quickly investing in infrastructure to handle the monster demand from those working or playing from home. Plus, should schools across the country move to online classrooms this fall, AMD could see even bigger demand.
“Microsoft and Zoom are witnessing massive upticks in usage across China, Italy and the U.S. because of coronavirus. Therefore, there will be continuous growth in the demand for cloud infrastructure services and spending on specialized software, communications equipment, and telecom services,” says Markets and Markets.
4. AMD Earnings Growth is Solid
First-quarter revenue came in at $1.79 billion, up 40% year over year thanks to computing and graphics revenue. On a quarterly basis, revenue slipped 16%. Gross margins were up 46% year over year thanks to Ryzen and EPYC processor sales. Operating income came in a $177 million, from $38 million year over year.
The company also continues to outperform Intel (NASDAQ:INTC) again. In fact, “Analysts expect Intel’s revenue to rise less than 3% this year as its earnings dip 3%. Meanwhile, AMD’s revenue and earnings are expected to surge 25% and 61%, respectively,” said Motley Fool contributor Leo Sun.
The Bottom Line on AMD Stock
Even with the coronavirus, there are still plenty of catalysts that could push AMD stock to $75 this year. New gaming consoles are being released from Microsoft and Sony. And since more folks will likely work from home, the company could see higher demand for cloud computing services, and data center chips.
Better, the company will continue to steal market share from Intel, and could easily run to $75 this year, and perhaps $100 by mid-2021.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
