AMD Stock Is Still a Buy as It Returns Toward Pre-Pullback Form

Advanced Micro Devices (NASDAQ:AMD) stock is was down 5% last week presenting a great opportunity for investors to buy the dip. Even as it climbs back to it’s pre-dip levels.

What to Expect From AMD Stock Ahead of July's Earnings Report
Source: Fabio Alcini /

The pullback in AMD stock came after the share price ripped 25% higher over the past month, hitting a 52-week high of $122.49 before falling back to $104.38.

It trades at $108 today.

However, looks as if it will be temporary and investors should buy shares of the semiconductor company now before they are again moving above $120 per share.

Bank of America recently issued an extremely bullish note on AMD stock, calling the company a “top catchup candidate” and putting a $135 price target on the shares.

Positive Earnings and AMD Stock

The current pullback in AMD stock comes despite the chip maker reporting exceptional second-quarter earnings.

In its second-quarter results, AMD reported revenue of $3.85 billion, up 99% from a year ago and ahead of the 93% revenue increase the company announced in this year’s first quarter.

The company also reported earnings per share (EPS) of $0.58, above analyst expectations of $0.47.

AMD also raised its forward guidance, saying that it now expects revenue to grow 60% this year compared to 2020, up from previous guidance of 50% growth.

The company attributed the higher forward guidance to continued strong demand for its semiconductors as well as growth spurred from its pending acquisition of fellow semiconductor company Xilinx (NASDAQ:XLNX).

The addition of Xilinx gives AMD advanced capabilities in artificial intelligence and helps the company expand into semiconductors made specifically for use in motor vehicles. 

Xilinx too has positive financials. In its most recent earnings, Xilinx reported revenue of $879 million, up 21% from a year ago and near-record levels.

Xilinx also reported free cash flow of $373 million, up 42% from the same period of 2020. AMD’s acquisition of Xilinx still requires some regulatory approvals around the world, notably in China, but approval and completion of the deal look increasingly likely.

Bullish Run Ahead

Wall Street analysts aren’t the only ones forecasting a bullish run for AMD stock.

Options traders have been buying “call” contracts on the stock, betting that it will run higher in the near term.

Between Aug. 16 and 20, options traders bet more than $1.5 million that AMD stock will run higher in the future on expectations that the share price will soon make a technical break upwards and reach a new all-time high.

While there is currently a global shortage of semiconductors and microchips, that does not appear to be impacting AMD’s bottom line or outlook.

On the contrary, skyrocketing demand for the chips made by AMD has helped the company financially as it has raised prices and wound down its inventory supply.

The company also continues to expand the customer base for its chips, with the newest versions of the PlayStation and Xbox gaming consoles now using AMD chips, and the company’s GPUs helping to power Tesla (NASDAQ:TSLA) electric vehicles.

Buy AMD Stock

Despite this temporary pullback, the future looks bright for AMD and its shareholders. Analysts and traders remain bullish on AMD stock, pointing to its upside potential as a leading semiconductor manufacturer even during the worldwide chip shortage.

With the Xilinx merger likely to be approved and demand for its products growing by the day, now is a great time for investors to buy the dip in AMD stock.

On the date of publication, Joel Baglole held a long position in AMD. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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