Over the past few years, Advanced Micro Devices (NASDAQ:AMD) has delivered stunning returns to investors. But given what has played out on the markets over the past few weeks, I can see why many folks may be itching to sell AMD stock.
Up more than 1,100% in the past five years and more than threefold since the spring of 2020, it may seem like muted returns lie ahead for this semiconductor giant. However, I wouldn’t assume right off the bat that it’s going to play out that way.
Why? You may point to the continued bull market or the global chip shortage as the main reason behind the stock’s success. True, both of these factors played a role. But not the main role. Instead, the factors fully under AMD’s control are what have really propelled shares to new all-time highs. Grabbing market share from rivals and making the right moves when it comes to fast-growing end user markets, the actions of AMD’s talented management have been key in its success.
Market conditions may change and the chip shortage could resolve. But this will not change this third, more paramount factor. So, as AMD continues to “crush it” in existing markets and move into new opportunities, AMD stock investors should certainly stick around for the ride.
AMD Stock at a Glance
Going into November, things were humming along for shares in AMD. The stock was trending higher, following its strong third-quarter earnings report released on Oct. 26. For fiscal Q3, the company reported $4.31 billion in revenue, up 54% year-over-year (YOY) and ahead of sell-side estimates. Earnings per share (EPS) of 73 cents came in ahead of estimates as well.
Along with this, another development helped sustain bullishness for AMD stock: a possible metaverse catalyst. Granted, investors may have become too enthusiastic about this development — the operative word here is “possible.” Nonetheless, it did help shares make their way to a new all-time high.
Following the selloff, however, the market seems to have forgotten about the company’s positives, shifting focus to its negatives and vulnerabilities. In addition to its vulnerability if the volatility in stocks continues, there are also a few concerns specific to AMD stock. For instance, both the valuation and a potential change in market enthusiasm for growth stocks could push shares lower.
I’ll go as far as to say these issues could apply more pressure to AMD in the near term. But compared to the stock’s more long-term positives? There’s no reason to believe it’s time to pack it in with this top-performing pick.
Plenty of Runway Lies Ahead
Now trading for between $135 and $140 per share, concerns are that AMD stock will fall even lower before it returns to (or exceeds) the all-time high of $164.46.
Bearish analysts and commentators point to many things to back up this take. They point to its high valuation. The bears also talk about the risk that the global chip shortage will morph into a global glut. Or, that demand among end users in cloud computing, data centers and gaming will wane, causing AMD’s growth to slow.
But taking a closer look at the situation, it’s hard to believe that disappointment is just around the corner for AMD. Instead, I see plenty of runway ahead. Why? In its earnings release, CEO Lisa Su said the following about this year’s performance:
“Our business significantly accelerated in 2021, growing faster than the market based on our leadership products and consistent execution.”
For 2022, overall growth may not necessarily accelerate. But given these two strengths — “leadership products” and “consistent execution” — AMD stands to continue growing faster than the overall chip market. That includes gaining more market share from rivals. It also includes benefiting from strong demand among key end-user markets.
The Bottom Line on AMD Stock
Besides continued success with its current game plans, there’s something else in play that bodes well for AMD stock going forward. As I recently discussed, the company’s growing exposure to 5G networking is also worth noting.
Earning a “B” rating in Portfolio Grader, price action in this stock could remain choppy in the short run. But, with it still looking like a winner long-term, there’s no reason to bail on AMD now.
On the date of publication, Louis Navellier held a long position in AMD. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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