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 five 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.
On July 23, 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.
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 fourth quarter, Intel regained market share from AMD in CPUs for desktop and notebook PCs, according to Mercury Research. That ended a three-year streak of market share gains by AMD in the PC segment on a quarter-to-quarter basis. AMD also suffered supply constraints with its contract manufacturer in the period.
AMD’s unit share of desktop PC processor sales was 19.3% in the fourth quarter, down from 20.1% in the third quarter. However, it was up from 18.3% in the year-earlier period.
AMD’s unit share of notebook PC processor sales was 19% in the December quarter, down from 20.2% in the September quarter. But it was up from 16.2% in the year-earlier period.
However, AMD continued to gain share in CPUs for servers during the fourth quarter. Its server CPU market share was 7.1% in the December quarter. That compares with 6.6% in the September quarter and 4.5% in the year-earlier quarter, Mercury said.
Advanced Micro Devices News: New PC, Server Chips
On Oct. 8, 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.
AMD Fundamental Analysis
Late Jan. 26, AMD reported better-than-expected fourth-quarter results, thanks to strong demand for PC, gaming and data center products. But AMD stock fell 6.2% the next day.
AMD earned an adjusted 52 cents a share on sales of $3.24 billion in the December quarter. Analysts expected AMD earnings of 47 cents a share on sales of $3.02 billion. On a year-over-year basis, AMD earnings rose 63% while sales climbed 53%.
For the current quarter, AMD expects to generate revenue of $3.2 billion, up 79% from the year-earlier period. Wall Street analysts predicted AMD sales of $2.73 billion in the first quarter.
For the full year, AMD expects sales to rise 37% to $13.38 billion. Analysts had been looking for 2021 revenue of $12.24 billion.
At least six Wall Street analysts raised their price targets on AMD stock after the company’s earnings report.
The next potential catalyst for AMD stock will be the company’s first-quarter earnings report, due in late April.
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.
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. It ended the regular session April 1 at 81.09.
AMD stock has an IBD Relative Strength Rating of 44 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. And AMD’s relative strength line has declined since mid-December as it underperforms the S&P 500 index.
It has an IBD Accumulation/Distribution Rating of D, indicating institutional selling of AMD shares.
Is AMD Stock A Buy Right Now?
AMD stock is not a buy right now. It is trading below its 50-day moving average line, a negative sign.
AMD stock has an IBD Composite Rating of 82 out of a best-possible 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.
The IBD Stock Checkup tool ranks AMD as No. 13 out of 31 stocks in IBD’s fabless semiconductor industry group. So, there are better stocks in the group to consider.
Also, the fabless chipmaker group ranks No. 115 out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in the top 40 industry groups.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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