- Advanced Micro Devices (AMD) stock dips are opportunities, not warning signs.
- Modest valuation and a lack of danger signals on the chart support a long-term optimistic look.
- Caution is good, but not all-out panic.
Advanced Micro Devices (NASDAQ:AMD) stock has had consistent seasonality behavior for the last three years. Case in point, AMD stock is down 24% this year, more than three times worse than the S&P 500. But does that mean you should avoid it here? No. I think now is a time to buy.
Certainly, it makes more statistical sense to buy this semiconductor stock after a correction and going into May. But I think there should be better outcomes for those who hold it from even now through fall.
Some active investors may try to trade around these edges. But for most longer-term investors, it’s best to make it as simple as possible. For example AMD stock lost 13% in two days this week. After a disappointing Wednesday, it fell 8% again on Thursday after a downgrade from Barclays. They expressed overall sector concerns, so they chose to opt out and watch.
I respect an analyst that expresses their opinion — that is their job. But I find it ridiculous that a stock of this quality suffered so much from that. After all, “I don’t know so I won’t play” doesn’t mean the game is bad. And an analyst rating doesn’t change the facts that are in the AMD financial statements.
| AMD | Advanced Micro Devices | $107.72 |
AMD Stock Is In Good Hands
Under the leadership of CEO Lisa Su, AMD has accomplished nearly an impossible feat. It more than doubled its business in three years while growing its net income roughly tenfold. Those metrics show absolutely no signs of trouble.
Competition is not a problem either. The demand for tech is growing at an exponential rate, so, there’s enough business to go around. Intel (NASDAQ:INTC), AMD and Nvidia (NASDAQ:NVDA) will all win in the end. If the stock markets are higher in the future, these three are also doing well.
The downgrade yesterday is immaterial to the success of the company. I commend them for their concern, but I would stick to facts and figures. Since I am not from Wall Street, I like to keep thing simple.
The Facts Tell a Good Story
The facts and the figures in the financial statements and the charts don’t lie. There’s no looming sign of impending intrinsic danger for AMD stock. Smart money should be looking for entry points, not panic exits.
This is where the investment mantra of Warren Buffett could apply perfectly. When everyone is fearful of AMD, I would look to be greedy.
Don’t get me wrong, I realize there is much going wrong with the world. In fact, I expected some downside this week. But the problem is not with AMD stock itself but from outside risks.
Not even valuation is an issue for this stock. It has a relatively modest price-to-sales under 10 and a price-earnings ratio under 50. For a company that grows this fast, these are not alarming numbers.
Remember how long critics targeted Amazon (NASDAQ:AMZN) for running on low margins. It takes effort and money to deliver growth this big. At least this one has been profitable since 2018, and last year it netted almost $3.2 billion. Moreover, management generates $3.5 billion in cash from operation. So the rising interest rate environment is not likely to negatively affect it much.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
