At this time in 2019, you wouldn’t need some super-smart roboadvisor algorithm using parts from Advanced Micro Devices (NASDAQ:AMD) to tell you that buying AMD stock was a super-smart move. And what applied then surely seems to be the case now.
Back in mid-August 2019, this multinational semiconductor company based in Santa Clara, Calif. traded for about $31.50 per share. Fast forward to the present and the stock is sitting pretty at more than $80 per share, where it has generally been since Aug. 4. Up 160% year over year, it continues to populate lists of hot tech stocks to buy, including this one from InvestorPlace’s Tyler Craig.
As for the analysts, it’s still very much a love affair with the chipmaker, as the Wall Street Journal reports that 14 of 37 firms label it a buy. Another 18 sit on the fence, calling it a hold. That could reflect any number of factors.
For starters, the company will have to hit an earnings-per-share analyst target of 35 cents in Q3, more than double the 16-cent target for the second quarter. AMD has also surpassed its median target price of $76 per share; its high target is $120.
Whatever those numbers suggest, market mavens will have to dig hard to find any reason to dislike Advanced Micro Devices — and will likely come up empty handed anyway. For Q2 2020, AMD reported total revenues of $1.93 billion, up 26% year over year. That followed a blazing Q1, which saw revenues soar 40% year over year, hitting $1.79 billion.
Here’s Why to Buy AMD Stock Now
All signs point to buying AMD stock now but not waiting for too much longer. Given its trajectory over the last 12 months — one of uninterrupted climbing — it’s hard to say how investors and the market will react if the stock takes any ding beyond any normal profit taking. A flare up of the novel coronavirus in the fall and winter could disrupt supply chains or impact consumer spending on discretionary items.
But it’s just as likely, perhaps moreso, that continued quarantines and mask requirements will force schools, white-collar businesses and anyone who’s ditched a cubicle for a laptop to put whatever money they have down on new devices that contain a chip.
And when Wall Street looks for a rallying point in a year of unprecedented trial, it leaves its heart in San Francisco, as in the Silicon Valley. Seemingly impervious to the faltering economy, record unemployment and a free-falling federal deficit, tech stocks are enjoying run-ups that other industries, from airlines to energy, might not experience for a long time, if ever.
AMD’s Run Should Continue to Stun
Yes, it’s easy to treat AMD as something of an upstart, enjoying a moment in the sun before it returns to standing in the shade of tech giants that include chipmaker Intel (NASDAQ:INTC). Interestingly, the companies share some history, as founder Jerry Sanders left Fairchild Semiconductor in 1969 to start AMD, while Gordon Moore and Robert Noyce departed a year earlier to launch Intel.
Yet the Intel brass can only wish, after 12 months that yielded a flat share price, that they were having as good a year as their rival. Nor could they have been happy to hear Jefferies analyst Mark Lipacis predict on Aug. 4. that AMD will “rapidly eat into Intel’s data center market share.” Blame it in part on Intel’s difficulties in transitioning to new 7-nanometer chips, a struggle that could help AMD seize 50% of the server market within the next five years, up from roughly 10% today.
Just a few days later, D.A. Davidson analyst Ben Wilson gave Advanced Micro Devices a huge boost that backed up the forecasts made by Lipacis. Wilson pointed to “a rapid deployment of AMD’s processors by Amazon. The e-commerce giant is reportedly ramping up its use of AMD’s next-gen chips on its Amazon Web Services cloud computing platform.”
Now, consider this: Amazon stock has doubled in price since January 2019. It’s hard to imagine any company that Amazon likes as much as AMD hitting a pothole in the foreseeable future.
As of this writing, Lou Carlozo did not hold a position in any of the aforementioned securities.