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Advanced Micro Devices (AMD) has been on an impressive run over the past 52 weeks, with shares of the chip stock up more than 126% over this time frame. With the global semiconductor market expected to reach $736 billion by 2027, according to Statista, AMD finds itself well-positioned, with a diversified foothold spanning CPUs, GPUs, and enterprise data centers. Bolstered by new product launches in 2023, including the industry-leading Instinct MI300 data center GPUs, AMD captured 25% market share in the data center space last quarter, putting pressure on mega-cap rivals like Nvidia (NVDA) and Intel (INTC).
But with enthusiasm over artificial intelligence (AI)-fueled growth pushing related stocks into the stratosphere, does AMD still present an attractive risk-reward profile for investors after doubling in the past year? Here's a closer look at the prospects for AMD right now, and what Wall Street analysts are expecting next.
Is AMD Stock a Good Value Right Now?
While Nvidia is the giant of GPUs and Intel still leads the market in CPUs, AMD has a diverse portfolio of semiconductor solutions, offering top-notch computing and graphics tech. It's not just about PCs and data centers anymore; they're also big players in gaming and embedded systems.
This innovation focus has translated into exceptional stock gains, with AMD shares surging 170.16% over the past 52 weeks.
Notably, CEO Dr. Lisa Su just sold AMD shares worth $20 million, though the sales were carried out in three tranches under a Rule 10b5-1 trading plan the executive adopted last November.
But it might not be too late to take part in the stock's rise. Even after this meteoric rally, AMD looks undervalued based on its future growth potential. This is based on AMD's price/adjusted earnings to growth (PEG) ratio of 1.13 - which is not only well below the median PEG ratio of 2.03 for the broader tech sector, it's also a significant discount to AMD's 5-year average PEG valuation of 1.47.
Additionally, AMD stock is priced at 11.05 times forward sales, compared to a steeper multiple of 17.68x sales for NVDA.
AMD Beats on Q4 Revenue
AMD reported Q4 2023 earnings in late January and knocked it out of the park on revenue, with the top-line rising 10% from the year-ago quarter to $6.2 billion. EPS of $0.77 arrived in line with expectations.
Looking ahead, AMD said it expects to see sequential declines in its client, embedded, and gaming segments during the current quarter, and guided for Q1 revenue of $5.4 billion. That missed the mark for analysts, who were looking for $5.75 billion, on average.
While the quarterly report wasn't exactly an Nvidia-level blowout, the cautious guidance suggests that AMD won't have to stare down any Nvidia-sized earnings expectations in its next quarterly release, either. And considering AMD has a history of outperforming earnings estimates, these predictions might even turn out to be on the conservative side.
What Do Analysts Expect for AMD Stock?
On average, Wall Street is targeting adjusted EPS of $0.61 for the current quarter, with revenue expected at $5.44 billion.
Analysts are pretty bullish on AMD, with a consensus rating of "strong buy" based on recommendations from 33 analysts. Out of that group, 27 call AMD a “strong buy,” along with just 1 “moderate buy” and 5 “holds.”
The mean price target of $185.11 indicates expected upside potential of 5% from current levels, while the Street-high forecast of $270 is a premium of about 53%.
The Bottom Line on AMD Stock
Despite its impressive run up the charts over the past year, AMD stock still presents a compelling blend of growth and value, underscored by its reasonable PEG ratio. For investors seeking to tap into the dynamic semiconductor sector without paying a steep premium for growth, AMD represents a potential opportunity to invest in a company with a solid portfolio of semiconductor solutions and a long history of nimble execution in a fast-growing field.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
