Advanced Micro Devices (AMD) stock jumped to an all-time high after the chipmaker reported third-quarter results. But with a pullback in shares, some investors may be wondering: Is AMD stock a buy right now?
X
AMD has staged an amazing turnaround over the past six years, fueled by new products and improved profitability. And AMD stock has climbed as a result.
AMD competes with Intel (INTC) in making central processing units, or CPUs, for personal computers and servers. It also rivals Nvidia (NVDA) in the market for graphics processing units, or GPUs, for PCs, gaming consoles and data centers.
Founded in May 1969, AMD went public in September 1972. AMD shifted to a fabless semiconductor business in March 2009 by spinning off its factories as GlobalFoundries (GFS).
Chief Executive Lisa Su Making A Difference
Current Chief Executive Lisa Su took the reins in October 2014. She shepherded the Santa Clara, Calif.-based company into a new era with its Ryzen PC processors and Epyc server chips in 2017.
Under her supervision, AMD jumped ahead of Intel in making CPUs at smaller node sizes, giving its products an edge in speed and performance. AMD is making chips at 7-nanometer scale, while Intel has struggled to make chips at 10-nanometer scale. AMD is now developing chips at 5-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
In July 2020, Intel announced a six-month delay in production of its already behind-schedule 7-nanometer processors. Intel now expects to ship its first 7-nanometer processors in late 2022 or early 2023. By that time, AMD could be making 3-nanometer processors, analysts said.
Also, in June 2021, Intel revealed a delay in production of its next-generation Xeon data center processors by about one quarter to the first quarter of 2022.
The situation has helped AMD take market share from Intel in PCs and servers. Those gains have buoyed AMD stock.
Chip foundry Taiwan Semiconductor Manufacturing (TSM) produces AMD’s chips.
Su also is overseeing a potentially transformative acquisition. In October 2020, AMD announced an all-stock deal worth $35 billion to buy Xilinx (XLNX) to expand its growing data-center business. However, AMD stock fell on the Xilinx acquisition news. Critics said the acquisition complicates AMD’s “clean” investor story around market share gains in processors.
Intel Losing Market Share To AMD
In the third quarter, AMD continued to take market share from Intel in CPUs for notebook PCs and servers, according to Mercury Research. But it lost ground in desktop PC processors as it prioritized higher-margin products.
AMD’s unit share of desktop PC processor sales was 17% in the September quarter, down from 20.1% in the year-earlier period.
However, AMD’s unit share of notebook PC processor sales was 22% in the third quarter, up from 20.2% in the same quarter last year.
Advanced Micro Devices made the biggest gains in the more lucrative server CPU business. Its server CPU market share was 10.2% in the period, up from 6.6% in the third quarter last year.
AMD made its gains despite supply constraints with its contract manufacturer in the period.
Advanced Micro Devices News: New Server Chips
On Nov. 8, AMD announced new specialized processors for different data-center workloads. It also added Meta Platforms (FB), the parent company of Facebook, as a customer for its server chips. AMD stock jumped 10.1% on the news.
On May 19, AMD announced a new share buyback program. The company intends to repurchase up to $4 billion worth of its common stock. AMD stock advanced 2.4% on the news.
On March 15, AMD introduced its third-generation Epyc processors. The chips are designed for high-performance computing, cloud data center and enterprise server applications. AMD stock rose 1.8% on the news.
On Jan. 12, during a keynote speech at the virtual CES 2021 tech conference, Chief Executive Su introduced the company’s new Ryzen 5000 Series mobile processors. She called the chips “the most powerful PC processors ever built for ultrathin and gaming notebooks.” However, AMD stock fell 2% that day.
In October 2020, AMD introduced its current-generation Ryzen processors for desktop computers. It described its Ryzen 5000 series central processing units as the “fastest gaming CPUs in the world.” The Ryzen 5000 series products are aimed at PC gamers and content creators.
AMD Fundamental Analysis
Late on Oct. 26, AMD reported better-than-expected third-quarter results and guided higher for the current quarter. However, AMD stock dipped 0.5% the next trading session.
AMD earned an adjusted 73 cents a share on sales of $4.31 billion in the September quarter. Analysts had expected AMD earnings of 66 cents a share on sales of $4.11 billion. On a year-over-year basis, AMD earnings jumped 78% while sales climbed 54%.
AMD’s data-center processor sales more than doubled year over year in the third quarter.
For the December quarter, AMD expects to generate sales of $4.5 billion vs. Wall Street’s estimate of $4.25 billion. That would translate to year-over-year sales growth of 39%.
AMD Stock Technical Analysis
AMD stock sank to a nearly four-decade low of 1.61 a share in July 2015 before starting its epic recovery.
On July 28, AMD stock broke out of a cup-with-handle base at a buy point of 95.54, according to IBD MarketSmith charts.
On Oct. 18, AMD stock broke out of a double-bottom base at a buy point of 114.59. It surged to a record high of 155.65 on Nov. 9 before pulling back.
Today, AMD stock has an IBD Relative Strength Rating of 95 out of 99. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
AMD stock has a best-possible IBD Composite Rating of 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Is AMD Stock A Buy Right Now?
AMD stock is not a buy right now. It is extended above the 5% buy zone of its recent breakout. It ended the regular session Nov. 12 at 147.89.
It needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD’s Big Picture column for the current market direction.
The IBD Stock Checkup tool shows AMD tied for first place among 32 stocks in IBD’s fabless semiconductor industry group.
The fabless chipmaker group ranks second out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in the top 40 industry groups.
Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.
To find the best stocks to buy or watch, check out IBD Stock Lists as well as IBD’s Leaderboard, MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
YOU MAY ALSO LIKE:
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader
Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists
