Advanced Micro Devices (NASDAQ:AMD) has yet to re-hit its high-water mark set earlier this year, but as bullishness for AMD stock continues to build again, reaching its all-time high may well be within reach in the immediate term.
Right now, several weeks ahead of the AI chip contender’s upcoming quarterly earnings release, shares are surging. The reasons for this are manifold.
Wall Street’s sell-side community is divided over whether AMD will deliver an earnings beat at the end of July. However, if the company pulls it off, expect the latest rally to continue. Perhaps, to the extent that the stock roars back to prices north of $200 per share.
That said, if this bullish scenario does indeed play out in the weeks ahead, don’t let it ride. Instead, consider it high time to take the money and run.
AMD Stock: Building Momentum Ahead of Earnings
Advanced Micro Devices is expected to next report quarterly results sometime around July 30. As mentioned above, shares have steadily gained in recent weeks, thanks to substantive factors, not mere hope and hype.
First, investors have become more bullish on the other “AI chip contenders,” not just Nvidia (NASDAQ:NVDA). The market has bought into the bullish narrative being laid out by analysts like Melius Research.
Earlier this month, Melius Research argued that so-called “AI laggards,” like AMD, could surge during the back half 2024, thanks to continued booming demand for AI chips, particularly AI-PC chips.
Second, and more specific for AMD stock, shares have benefited from a spate of bullish analyst ratings.
So far in mid-July, analysts at Roth MKM, Wells Fargo and TD Cowen have raised their price targets for Advanced Micro Devices shares. With Roth MKM and Wells Fargo, their price target raise is because of the third factor boosting AMD lately.
On July 10, AMD announced plans to acquire Silo AI, a Finland-based artificial intelligence developer, for $665 million. Analysts and investors are bullish that this acquisition will bolster AMD’s ability to compete and thrive in the fast-evolving AI space.
The Best Move in Case of a Post-Earnings Rally
Again, while AMD stock has benefited lately from a surge in bullish sentiment, the sell-side isn’t fully in agreement when it comes to its earnings forecasts.
According to Seeking Alpha, among 33 sell-siders covering the stock, 14 have raised their quarterly earnings forecasts, yet 19 have lowered them since the last earnings release.
Still, even if it’s unclear whether Advanced Micro Devices will beat on earnings, that’s not to say that shares will tumble if the company reports an earnings miss, or merely just meets expectations. Strong guidance for AMD’s AI-PC chip rollout could outweigh mixed fiscal results.
If the company delivers both an earnings topper, plus blockbuster guidance, look out. From there, AMD could make a fast move back to $200 per share. Perhaps, even back to the above-referenced high-water mark, which is $227.30 per share. With this, if you currently hold a position, there’s little reason to cash out now.
Post-earnings, though, it may be a different story. At current prices, there’s a fair bit of uncertainty baked into AMD’s valuation. If shares complete a full rebound, however, they will be back in “priced for perfection” territory.
Hold on for Now, but Get Ready Bail
If AMD soars back to $200, $225, or even $227.30 per share, not only will expected 2024 growth become overly factored into its valuation. At such prices, the potential for turbocharged growth in 2025 will become priced-in as a near-certainty.
If that happens, the stock will have limited upside if it lives up to expectations, but significant downside if the company falls short of expectations in the coming quarters.
There’s still enough left on the table to warrant maintaining a position until earnings. However, come August, consider it time to cycle into more favorably priced AI growth plays.
Recently, when discussing top growth stocks, I cited two such examples: Oracle (NYSE:ORCL) and Qualcomm (NASDAQ:QCOM).
Hence, while it’s perfectly fine to hold onto AMD stock for now, prepare to soon make an exit, and keep an eye on other strong opportunities out there in this space.
On the date of publication, Thomas Niel did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
