Advanced Micro Devices (AMD) stock is down since the chipmaker reported fourth-quarter results in late January. With a pullback in shares, some investors may be wondering: Is AMD stock a buy right now?
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 into a joint venture called GlobalFoundries.
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, on June 29, 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. On Oct. 27, 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 first quarter, AMD continued to take market share from Intel in CPUs, according to Mercury Research.
AMD’s unit share of desktop PC processor sales was 19.3% in the March quarter, up from 18.6% in the year-earlier period.
AMD’s unit share of notebook PC processor sales was 18% in the first quarter, up from 17% 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 8.9% in the period, up from 5.1% in the March quarter last year.
AMD made its gains despite supply constraints with its contract manufacturer in the period.
Advanced Micro Devices News: New PC, Server Chips
Last October, AMD introduced its next-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.
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.
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 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.
AMD Fundamental Analysis
Late on April 27, AMD reported better-than-expected first-quarter results thanks to strong demand for PC and data center products. But AMD stock fell 1.4% the next day.
AMD earned an adjusted 52 cents a share on sales of $3.45 billion in the March quarter. Analysts expected AMD earnings of 44 cents a share on sales of $3.21 billion. On a year-over-year basis, AMD earnings rocketed 189% while sales jumped 93%.
For the June quarter, AMD expects to generate sales of $3.6 billion, up 86% year over year. Wall Street had predicted $3.29 billion in sales for the second quarter.
For the full year, AMD expects revenue growth of about 50% over 2020. That’s up from its prior guidance for about 37% growth in 2021.
The next catalyst for AMD stock could be the chipmaker’s second-quarter earnings report, due in late July.
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 Nov. 30, AMD stock broke out of a fourth-stage, double-bottom base with a buy point of 88.82, according to IBD MarketSmith charts. It notched a record high of 99.23 on Jan. 11.
For two months after its breakout, AMD stock traded in and out of the 5% chase zone. However, it triggered a round-trip sell signal after retreating from a breakout gain of more than 10% back to below the buy point.
AMD stock flashed another sell signal on Feb. 23 when it dropped 7% to 8% below the buy point of its breakout.
Today, AMD stock has a decent IBD Relative Strength Rating of 71 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, but it soon could be. It has formed a cup base with a buy point of 99.33, according to MarketSmith charts. AMD stock ended the regular session July 7 at 90.54.
The IBD Stock Checkup tool shows AMD tied for first place with three other stocks in IBD’s fabless semiconductor industry group.
The fabless chipmaker group ranks No. 37 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.
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