Advanced Micro Devices(NASDAQ:AMD) has been one of the best performing tech stocks over the past several years. AMD has been aggressively taking on its rivals in the computer CPU and GPU spaces, gaining significant market share. After rallying at the beginning of 2020, AMD stock stalled until mid-July. Then for several weeks, AMD climbed again, racking up a gain of over 50%, before once again hitting a plateau. What will happen next?
Are AMD’s shares in a holding pattern until their next big spike or is the semiconductor company’s stock finally beginning to run out of steam?
AMD’s 2020 Performance Compared to Rival Stocks
So far in 2020, AMD stock has posted a gain of 100%. That’s pretty remarkable, considering the challenges the company has faced. Demand for laptops and game consoles has surged because of the novel coronavirus pandemic, but the pandemic has also caused supply-side disruptions for many of AMD’s customers.
The performance of AMD’s two rivals has been mixed this year.
The shares of another computer processor maker, Intel (NASDAQ:INTC), started 2020 at five-year highs. But the wheels quickly fell off, as it never fully recovered from the market’s plunge in March, and then it got hammered by the delays of its 7nm chip, which cost Intel’s chief engineer his job.
Rubbing salt in Intel’s wounds, AMDs new line of Ryzen mobile CPUs started making big gains in the laptop space. At this point, Intel stock is down 15% so far in 2020.
AMD’s big rival on the GPU side is Nvidia (NASDAQ:NVDA). Nvidia’s story in 2020 has been much different than Intel’s. Like AMD, its PC business has benefited from a surge of PC sales, and its graphics cards are in high demand for PC gaming rigs. Nvidia’s data center business has also surged. At this point in 2020, NVDA stock is doing even better than AMD’s shares, as Nvidia has jumped 135% this year.
Assessing the performance of AMD stock in 2020, I have detected a pattern. Around earnings time, its shares surge. They then plateau and stay within a fairly tight range until the next earnings cycle. That pattern was a little disrupted by the market’s meltdown in March which sent AMD spiraling to a 2020 low before it recovered.
After the shares bounced back from their March lows below $40, AMD stock exceeded $55 by the end of April, in the wake of the company’s Q2 earnings report. They remained in a narrow band between $50 and $55 for several months before starting to gain steam in mid-July.
AMD stock closed at $86.71 a week after Advanced Micro Devices reported that its revenue had jumped 26% and it raised its full-year guidance. The shares have, for the most part, once again plateaued since that time.
The company is expected to report its Q3 earnings in November. If the current pattern holds, the shares should stay in their current range for a few more months before beginning to climb. If that scenario materializes, now would be a good time to buy the shares. However, stocks’ patterns don’t continue forever. Further, many analysts feel that AMD has had a good run in 2020, but that its growth may be running out of steam.
The Bottom Line on AMD Stock
The Wall Street Journal is tracking 37 analysts who follow Advanced Micro Devices. Their average rating on the shares is “overweight,” so they feel AMD will outperform other semiconductor stocks. But the majority of the analysts have a “hold” rating on AMD. Their average 12-month price target of $77.50 is about 15% below its current levels.
Some analysts have been proven wrong by AMD in 2020. For example, back in February (when it was trading at the $57 level) the stock was downgraded by Wells Fargo. The firm gave the stock a $64 price target, which it blew past in July.
Advanced Micro Devices is also going to benefit from the production ramp of two next-generation video-game consoles, the Xbox Series X and the Playstation 5, which are expected to go on sale in time for the holidays. AMD makes the custom processors for both of the new consoles.
Will AMD shares rally again in November? That’s a pretty good bet. However, whether the stock can stay at those levels once earnings are revealed is the big questions. And at this point, most analysts have their doubts.
On the date of publication, Brad Moon did not have (either directly or indirectly) any positions in the securities mentioned in this article.