Advanced Micro Devices (NASDAQ:AMD) has been on fire after finally breaking out in late July. After dipping earlier this month, AMD stock has started settling down after its big run and now looks like it could be poised to rally once again.
Of course, it helps that Nvidia (NASDAQ:NVDA) recently reported earnings. Not that AMD needed Nvidia to provide a spark, but it needed NVDA not to blow the quarter and report bad news.
Thankfully for bulls on both sides, Nvidia reported very solid results and strong guidance. That’s allowing AMD bulls to breathe a sigh of relief. Now the question is, can shares push higher?
AMD Is Kicking Intel’s Butt
While it seems like earnings were the driver for AMD’s breakout, it was something that actually occurred a few days before the big move. In fact, it wasn’t even news from AMD that helped spur the move.
Instead, Intel (NASDAQ:INTC) announced that its 7nm chips were taking much longer than expected. Specifically, the delay should last all the way through 2021, failing to hit the market until 2022. This gives AMD a huge opportunity, not just for growth but for market share too.
Once left for dead, AMD has come back to be a real pain in the butt for Intel. The company has upped the ante by churning out quality products at a decent price. While once bloated by its balance sheet and lacking revenue, Advanced Micro is one of the best comeback stories in tech that investors should know about.
With Intel’s whiff on 7nm, AMD stock will be able to continue its upside momentum. And while we don’t know what kind of other positive impacts may come as a result (future purchases from customers as a result of using AMD over Intel), it’s virtually impossible to view this situation as a negative one.
Advanced Micro Has Growth
Beyond the situation with Intel though, AMD has growth. I have made the argument many times since the novel coronavirus selloff that growth stocks deserve an even larger premium than before.
That’s because a lot of companies had growth prior to Covid-19. Now though, many companies don’t have growth, while many are simply trying to have break-even growth vs. the prior year.
Therefore, it has been my opinion — whether its AMD, Nvidia or some other growth name — that the companies that were able to maintain or accelerate growth during this period should be assigned a higher valuation than the pre-coronavirus trading days. There are simply less stocks capable of providing growth; therefore, the ones that can are worth more.
With many moving to all-time highs, that theory is panning out. For AMD stock, the company is delivering, too.
Consensus expectations call for $8.91 billion in revenue this year, up 32.5% year-over-year. On the earnings front, analysts expect 70% growth to $1.09 per share. At the start of the year, these estimates stood near $7 billion and 62 cents per share, respectively.
The acceleration we’re seeing now raises an eyebrow — but it doesn’t stop there. Estimates for 2021 call for 22.5% revenue growth and 50% earnings growth. Both of these figures have also climbed significantly since the start of 2020. Put simply, AMD has an impressive amount of growth coming.
Trading AMD Stock
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Finally, let’s look at the charts. While AMD stock can be tough to trade sometimes, investors find solace in the fact it does tend to trade very technically.
It seemed like many people had forgotten AMD had doubled from its October lows to February highs. For a stock to double, it takes a lot of energy. In order to regain the energy to move higher, a stock either needs to correct or consolidate.
For AMD stock, shares did consolidate, chopping sideways from February through July — even with a big selloff in March and as Nvidia marched higher.
After the breakout over $60, shares eventually tired near $88. Catching the 20-day moving average as support now and as AMD stock makes a series of higher lows, look to see if this one can rotate over $88.
Above $88 will put the 261.8% extension in play at $95.71. If that’s in play though, so is $100, which statistically speaking, will likely to be hit if shares close north of $90. On the downside, a close below the 20-day moving average could put a move toward $70 in play, as well as the 50-day moving average.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.
