• AMD shares are attractively priced following a pullback in recent months
• The company has provided stronger than expected guidance for its 2022 sales
• The recently completed acquisition of Xilinx strengthens AMD’s competitive position.

The shares of semiconductor company Advanced Micro Devices (NASDAQ:AMD) look like a steal at current levels, with AMD stock down nearly 26% on the year.

Brought low by a broader retrenchment in technology stocks, semiconductors in particular, the weakness seen in AMD stock in recent months is no reflection on the company’s fundamentals or its long-term prospects, which remain bright.

Despite this year’s pullback, shares of Advanced Micro Devices remain up 31% from a year earlier, which is a testament to how far the stock has run. The current price of just under $107 a share provides an attractive entry point for investors.

Strong Fundamentals

 On Feb. 1, AMD issued another in a string of strong earnings reports. The Santa Clara, California-based company announced that it earned 92 cents per share in the fourth quarter of 2021, which was up 26% from a year ago and much better than the $0.76 earnings per share (EPS) that Wall Street analysts had been calling for.

AMD’s revenue amounted to $4.83 billion, which was 49% higher than a year earlier and beat the $4.53 billion that analysts had forecast.

Perhaps best of all, AMD issued bullish forward guidance, saying it anticipates 2022 revenue of $21.5 billion, which exceeds the $19.26 billion analysts had penciled in for the company. The 2022 sales figure represents a 31% increase over 2021′s sales number and is expected to be driven largely by strong server and PC processor sales, the company said.

Taken together, the Q4 results and 2022 forecast showed again that Advanced Micro Devices remains a best-in-class semiconductor company. AMD stock jumped 10% higher immediately after the earnings report was made public.

Divided Analysts

Despite the stellar quarter and strong forward guidance, analysts remain divided over the outlook for AMD and the entire semiconductor market. Chip stocks are down 13% on the year, as reflected in the price of iShares Semiconductor ETF (NASDAQ:SOXX). AMD stock is the third-largest holding, at 7.11% of assets, in the exchange-traded fund’s 32-stock semiconductor-focus portfolio.

AMD stock took a hit at the end of March when a prominent analyst at Barclays (NYSE:BCS) downgraded the shares, citing competitive pressures for chips in both the personal computer and gaming sectors. Blayne Curtis lowered his rating on AMD to “equal weight” from “overweight” and cut his price target on the shares by about 20% to $115.

Other analysts continue to express concerns about the ongoing global shortage of semiconductors that has impacted manufacturing of everything from smartphones to motor vehicles.

However, not every analyst is sounding a pessimistic note when it comes to AMD and the semiconductor space. Rosenblatt Securities took direct issue with Barclays’ downgrade in a note to clients, reiterating that it remains extremely bullish on the semiconductor sector, and AMD stock in particular, noting that the company is in no danger of missing its exceptionally strong 2022 sales forecast.

Rosenblatt reiterated its “buy” rating on AMD stock and set a street high $200 a share price target, which would be 74% higher than where the shares currently trade.

Among 32 professional analysts who cover AMD, the median price target on the stock is currently $152.50, implying 41% upside from current levels.

Xilinx Acquisition

In addition to strong organic growth in sales of AMD chipsets used in both video game consoles and cloud computing, which each grew more than 30% in 2021, AMD is also expected to achieve growth from its recently completed $35 billion acquisition of Xilinx that positions AMD to better compete with rival Intel (NASDAQ:INTC) in the market for data center chips. AMD completed the Xilinx purchase when it received regulatory approval for the deal from the U.S. Federal Trade Commission (FTC) in mid-February.

Closure of the Xilinx purchase stands in stark contract to rival Nvidia’s (NASDAQ:NVDA) decision to abandon its planned acquisition of British chipmaker Arm Ltd., which ended up being scuttled by regulatory hurdles and vocal industry concerns. NVDA stock, however, is up 4.9% in the two months since that deal was officially called off.

Xilinx enables AMD to increase its position in key markets for semiconductor chips such as data centers, artificial intelligence and fifth-generation (5G) wireless networks, particularly related to the automotive and aerospace industries. “Those are all markets that AMD has had very little presence in and they all need high performance computing,” said AMD chief executive officer Lisa Su in announcing the conclusion of the Xilinx deal.

Buy AMD Stock

The pullback in AMD stock since the start of this year shouldn’t dissuade investors from taking a position. If anything, it should encourage people to take a new position or grow their existing holdings of this leading semiconductor company. Far from being in financial straits or struggling to gain market share, AMD remains a company that is firing on all cylinders.

Strong earnings, bullish forward guidance and the recently completed purchase of Xilinx should all give investors confidence that AMD can continue to compete and win in the highly competitive chip industry. AMD stock is a buy.

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