Advanced Micro Devices (NASDAQ:AMD) announces its first quarter 2022 earnings on May 3 after the markets close. Raymond James analyst Chris Caso expects them to be outstanding. He upgraded AMD stock earlier this week to “Strong Buy” from “Outperform.”
According to Koyfin, AMD stock has the 10th worst performance year-to-date (YTD) of the Nasdaq 100. If you’re an aggressive investor, Caso’s upgrade, combined with the fact AMD is down 43% YTD, suggests buying its stock before it reports next week is worth the risk.
From where I sit, the upside at this point is a lot greater than the downside.
AMD Stock Target Price
As Caso stated in a note to clients on April 25, AMD currently has a “highly attractive valuation” given the company’s opportunities to gain market share from Intel (NASDAQ:INTC). He gives it a target price of $160, almost double where it currently trades. Investing.com reported Caso wrote in his note to clients:
As we have become more concerned about cycle risks given potential for slowing consumer demand and elevated inventory levels at customers, we favor those semi companies with strong secular drivers, more muted cyclical exposure and attractive valuations, for which AMD appears well positioned…
We have strong confidence regarding AMD’s position and share gains in the datacenter market.
Lastly, the analyst believes that market share at this point in the cycle is much more important than actual market growth.
It’s Time for AMD to Reverse the Trend
This time last year, I wrote that AMD stock had underperformed its peers for more than a year, suggesting that it could be ready to take flight. And it did. At the time, AMD’s share price was $81. By November, AMD had risen to a 52-week high of $164.46.
Unfortunately, its flight higher didn’t last. Today, as I write this, it’s at $85, down 48% in five months. Over the past six months, it’s down 29%, 665 basis points more than archrival Nvidia (NASDAQ:NVDA).
Of the two stocks, I will always opt for Nvidia because of its free cash flow (FCF) generation, but there’s no question AMD is cheap right now at 6.4x sales, well below its price-to-sales (P/S) multiple over the past two years.
I think the analyst is right on the money to upgrade AMD stock before earnings. If you’re an aggressive investor, buying now ought to pay off in the near and long term.
On the date of publication, Will Ashworth 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.
