The last time I weighed in on Advanced Micro Devices (NASDAQ:AMD), I said that AMD stock could easily explode to $100 per share thanks to a significant number of catalysts.
That was on July 30, as AMD stock traded at $76.09.
Not long after, AMD would run to a high of $94.28 before pulling back to $76 per share. The decline of AMD stock came as tech heavyweights fell as a result of a good deal of profit-taking. But don’t count out tech stocks, including Advanced Micro Devices, just yet.
Instead, use every dip in the shares as a buying opportunity. I still strongly believe that AMD is heading to $100, due to the company’s sizable catalysts.
Catalyst No. 1 – AMD is Still Chipping Away at the Competition
Not only is Intel (NASDAQ:INTC) losing market share to AMD, but NVIDIA (NASDAQ:NVDA) is as well.
In late August, for example, AMD launched its Radeon RX 5300 GPU graphics card, which will compete directly with NVIDIA’s GeForce GTX 1650.
More importantly, Advanced Micro Devices is quickly taking market share from Intel. AMD’s gains come as Intel continues to struggle with costly production delays that are hampering its next-generation chips. Intel’s issues are even driving companies like Amazon (NASDAQ:AMZN) to AMD chips, as reported by Motley Fool contributor Joe Tenebruso.
DA Davidson analyst Ben Wilson is also upbeat on AMD stock. According to The Fly, Wilson said:
“he now finds that regional data center availability for AMD’s (AMD) latest-gen Zen 2 processor has doubled on Amazon Web Services (AMZN) to 14 regions from 7 regions in his previous count,”
Moreover, later this year, AMD’s chips will be in new gaming consoles from Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE). The sales of graphics chips for consoles should meaningfully lift the stock going forward.
Catalyst No. 2 – AMD’s Earnings Continue to Impress
Advanced Micro Devices just posted a profit of $157 million in the second quarter, up from $35 million during the same period a year earlier. It also reported revenue of $1.93 billion, which was up 26% year-over-year.
For 2020, the company expects revenue growth of 32%, which is up nicely from the 25% increase it predicted a few months earlier.
“We expect strong second-half semi-custom growth as we read production to support the holiday launches of the new PlayStation 5, and Xbox Series X consoles,” said CEO Lisa Su, as quoted by CNBC.
Catalyst No. 3 – AMD Is Capitalizing on Working and Schooling from Home
With the coronavirus forcing many of us to work and learn from home, Advanced Micro Devices should see surging demand for its data-center chips. Data-center growth is expected to be “unrelenting,” said Maribel Lopez, the principal analyst of Lopez Research, as quoted by MarketWatch.
In addition, according to a recent report on cloud computing, “the industrial IoT market is expected to grow from $3,966.66 million in 2019 to $7,078.35 million by the end of 2025 at a CAGR of 10.13%,” says Zacks’ Ritujay Ghosh.
Catalyst No. 4 – Analysts Still Love Advanced Micro Devices
With Intel failing to produce, AMD could capture 30% to 50% of total market share from Intel, according to Jefferies analyst Mark Lipacis. He added that AMD could achieve EPS of $4.50 if it captures 30% additional market share and EPS of $6.50 if it can pick up 50% of the market from Intel.
Cowen analyst Matthew Ramsay raised his price target on AMD stock to $100 from $90. After speaking with AMD CEO Lisa Su, he noted:
“Messages of road map consistency, execution dependability and much closer collaboration with key customers shone through. With Intel’s road map in flux, but in larger measure due to AMD’s own product innovation, we forecast share gains and strong revenue/margin growth.”
The Bottom Line on AMD Stock
Use every dip in AMD as a buying opportunity. With plenty of near-term catalysts, including strong earnings growth, high analyst expectations, excitement about gaming consoles, and its ability to chip away at Intel and NVIDIA, AMD is the stock you want to own.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, an InvestorPlace.com contributor, 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.
