It has not been an easy ride lately, particularly for Advanced Micro Devices (NASDAQ:AMD). AMD stock is down 44% from its high in fourth-quarter 2021 and 37% so far this year. Tech stocks, growth stocks and more specifically, semiconductor stocks have been under pressure. That’s a triple-whammy when it comes to a stock like AMD.
Bulls are hopeful that a strong earnings report can dispel some of the negativity around the stock. Despite the rhetoric, I think there are reasons to be bullish.
First, when AMD reported earnings last quarter, it was able to top lofty expectations. The company delivered a top and bottom-line beat for its Q4 results. Further, its outlook for Q1 and the full year blew expectations out of the water.
Who knows what’s going on now, but as of three months ago, CEO Lisa Su & Co. were rather bullish on the business. The quarter raised “zero red flags” for AMD, according to one analyst.
Second, semiconductor companies are reporting pretty strong results. In recent days and weeks, Texas Instruments (NASDAQ:TXN), Taiwan Semiconductor (NYSE:TSM), ON Semiconductor (NASDAQ:ON) and Qualcomm (NASDAQ:QCOM) all reports solid results. Many provided better-than-expected outlooks, too.
While that doesn’t mean AMD will report strong results, it bodes well to know the world isn’t ending and that demand remains strong. Analysts expect 30% revenue growth this year, while the valuation argument is becoming a tailwind, not a headwind. Bears used to complain about the valuation for AMD stock. Well now trading at 22 times this year’s earnings, investors must ask if that’s really so bad.
Particularly when the company has strong secular growth at its back.
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Lastly, the stock was recently down about 50% from its all-time high. That obviously helped the valuation argument, but at some point, AMD stock is too cheap to ignore.
For now, the stock is doing a good job holding the 61.8% retracement. If that fails — whether right after earnings or later — then look at the $74 to $75 area for potential support. That’s followed by the 200-week moving average and $64.
On the upside, bulls need to see how AMD stock handles the $100 level and the declining 10-week moving average. Above $100 opens the door to the $110 to $115 area.
On the date of publication, Bret Kenwell 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.
