AMD shares are gaining again after January's sell-off. Is now the time to buy?
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Advanced Micro Devices (NASDAQ:AMD) suffered along with the general market during the swoon that gripped most of January, undoing gains recorded late in 2021 amid optimism that the semiconductor giant could cash in on the ongoing chip shortage. However, a strong earnings report has allowed the stock to bounce off of multi-month lows. Is now the time to buy as the company looks to shake off worries of higher interest rates to capture demand for its products?
Dragged Down by January's Sell-Off
AMD experienced a surge of investor interest in late 2021, as supply constraints in the semiconductor industry seemed to provide beneficial conditions for the entire market. The stock climbed from a level just above $100 in late September to a 52-week high of $164.46 by the end of November.
Even with a lackluster December, AMD still sat as high as $150 in the early days of January. Then, worries about rising interest rates gripped Wall Street, sending the overall market into a tailspin. AMD plummeted, losing more than 30% of its value over the course of a little more than three weeks.
Shares eventually closed at $102.60 on Jan. 27, generally reversing the rally it saw in October and November and returning to its levels of early October.
Shares of AMD have rebounded lately, however. They remain 11% lower year-to-date, but have climbed 8% over the past five sessions, thanks largely to a positive earnings report released on Feb. 1. Despite the jump, the stock still has a way to go before reaching the 52-week high it hit in late November. Shares of the semiconductor chipmaker closed at $132.85 on Wednesday.
Is AMD a Buy?
Wall Street analysts are mostly bullish on the stock, rating the stock a Buy, on average. Of the 39 analysts tracked by SA over the past 90 days, 17 have rated the stock a Strong Buy, 4 a Buy, 17 a Hold, and 1 a Strong Sell. SA authors also, on average, rate AMD a Buy.
Seeking Alpha's Quant Ratings agree with the bullish outlook of market watchers. Judging the stock on quantitative measures, the company scored an A+ for profitability, an A for growth and momentum, an A- for revisions. The main source of concern came from the stock's valuation, which receives a D rating.
Investor sentiment towards the stock has warmed significantly since the company issued an upbeat earnings report on Feb. 1. The results beat Wall Street estimates on both the top and bottom lines. The chipmaker posted a Q4 net income of 80 cents per share on revenue of $4.8B, topping analyst estimates of 76 cents per share on revenue of $4.5B.
AMDâs outlook was also above Street views. The company said it now expected 2022 sales of $21.5B. Analysts, on average, were anticipating sales of $19.3B.
The day after AMDâs earnings, Jefferies reiterated its buy rating on the company and upped its price target to $155 from $145, noting that AMD was able to make significant market share gains in the server and cloud spaces.
Meanwhile, Wedbush Securities said in a note that AMDâs quarterly report revealed âzero red flagsâ and that the company appeared to be successfully staving off competition from rival Intel. Wedbush has an outperform rating on the stock and a price target of $165.
AMD is also in the process of buying adaptive computing company Xilinx (NASDAQ:XLNX) for $35B in stock, a move aimed at further expanding its rapidly growing data center business. The deal recently cleared a significant hurdle by winning approval from Chinese antitrust regulators. The company said in late December that it now expects the transaction to close during Q1 2022.
Citibank said in a recent note that while Intel increased its market share for desktop and notebook microprocessors during Q4, AMD was able to expand its share in the server space. Citibank added that it expects to see a microprocessor price war as the sector returns to normal following months of pandemic disruption. The firm has a neutral rating on the stock, with a price target of $140.
For more on the stock, read a deep dive prepared by SA contributor The Asian Investor, who does not believe growth is slowing at AMD.