Technology firms have fiscally outperformed many other companies during the novel coronavirus pandemic. Advanced Micro Devices (NASDAQ:AMD) is an excellent example of a tech company that has thrived in challenging circumstances, and the price action in AMD stock reflects this.
That being said, it should also be noted that AMD shares have been stuck in a range since April. Plus, since it has a lofty trailing price-earnings ratio of 128, value investors will surely need a compelling reason to buy the stock now.
Today’s shoppers sometimes start buying holiday-season items months in advance, so AMD’s big catalyst might arrive sooner than people expect. And a couple of well-known gaming consoles could provide a powerful revenue boost for the company along with strong returns for AMD stockholders.
A Closer Look at AMD Stock
It’s amazing to consider that AMD stock was trading at a mere $1.78 in early June 2015. If you’re waiting for the shares to come down to that level again, your wish may never come true. Today, AMD shares cost around $58 apiece.
The pandemic only brought the stock price down for a month, with the short-term bottom coming in around $39. However, starting in mid-April, the price range in AMD stock became narrow. Specifically, the shares spent several months trading between $49.50 and $57.50.
Stocks don’t normally trade in narrow ranges forever. Therefore, a breakout or breakdown is bound to happen sooner or later. If gaming console sales could be the deciding factor, then it might be wise to buy AMD stock before the big move happens.
Big Tech Chooses AMD
It was also a monumental event when Sony (NYSE:SNE) selected AMD to power its popular PlayStation 4 gaming console. For AMD to earn these votes of confidence from Microsoft and Sony was, naturally, a blow to semiconductor-manufacturing rival Intel (NASDAQ:INTC).
“[AMD has the] leading edge IP in CPU, GPU, memory, video, audio, and I/O. They also designed the first quad core, X86 SOC, and it’s not a giant leap to take this to eight cores. Finally, AMD built an entire product division to support the effort that others weren’t prepared to commit.”
It’s that last part that really stands out. AMD beat out Intel with a more authentic commitment to powerful and flexible gaming console technology. That says a lot about AMD and, unfortunately, doesn’t say anything good about Intel in comparison.
New Consoles, New Revenues
If last year’s consoles are old news, don’t fall asleep at the wheel as the Sony PlayStation 5 and Microsoft Xbox Series X are coming later this year. And, AMD plans to boost its production of the semi-custom chips that will power these next-generation gaming consoles.
If you’re a gamer or are close to one, then you’ll probably know that gamers consider the latest console a must-have. As InvestorPlace contributor Chris Lau explains, “No one will want to invest in the current console platform when a new Xbox and PlayStation are available later this year.”
None other than AMD CEO Lisa Su projected that the Xbox and PlayStation refreshes will be among 2020’s biggest product launches. Su further stated that AMD expects “to see console gross margins improve as we go through the year.”
That’s a perfectly reasonable expectation as pandemic-precipitated lockdowns have produced a whole lot of bored, cooped-up, game-addicted people. Even before the holiday season rolls around, the demand for new gaming consoles should be robust.
And, AMD will be there to power those powerful consoles.
The Bottom Line
In many cases, buying a stock at a high price is difficult to justify. When it comes to AMD stock, however, investors might choose to make an exception.
After all, an upcoming frenzy of buying activity in the gaming console market should make AMD shares appear less pricey and much more valuable.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.