Advanced Micro Devices (NASDAQ:AMD) just released a stellar first-quarter (Q1) earnings report on May 3. Revenue was up 71% year-over-year with higher gross and operating margins. Moreover, the company raised its guidance for 2022. This includes higher organic growth and the addition of its recently acquired Xilinx business. As a result, investors can expect to see a higher AMD stock price by the end of the year.
Analysts now have an average price target of $133.63 per share, representing a potential gain of 40.1% for AMD stock. Similarly, TipRanks reports that the average price target of 23 analysts who have written on the stock in the last 3 months is $132.40. That represents 42.17% more than today’s price of $95.34.
AMD showed strong results from its server processor line of products, as well as its new Xilinx business. This is despite the softness in the general PC business. According to Barron’s, its stellar results show that it is taking market share from Intel (NASDAQ:INTC).
On the other hand, Barron’s says that a research firm reported that Q1 PC demand was down 5% and analysts are lowering their target prices for chipmakers like AMD. The weakening economy is lowering consumer demand along with supply shortages for PC parts.
This leaves investors in AMD stock in a tricky situation. The company says that the outlook for its revenue in Q2 will be 69% higher than last year and 10% quarter-over-quarter. For the full year of 2022, AMD now expects revenue will rise 60% over 2021.
AMD stock trades at 22 times 2022 forecast earnings and 19.4 times 2023 earnings, according to Yahoo! Finance, using Refinitiv analyst survey data. This is higher than Intel at 12.6 times and 12.3 times earnings, respectively. However, AMD stock is still well below its average historical forward price-to-earnings ratio of 51.6 times over the last five years, according to Morningstar. So, if AMD can still outperform analyst expectations of a general slowdown in the chip market, AMD stock might move higher by the end of the year.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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.
