Semiconductor company Advanced Micro Devices (AMD) is down approximately 13% month-to-date. With investors continuing to rotate out of expensive fast-growing tech stocks, AMD is one of the names that could be vulnerable to further downside should the rotation continue.
For now, I am bearish on the stock, primarily due to valuation and risks of competition, which may still be discounted in the current share price. (See Analysts' Top Stocks on TipRanks)
AMD's Momentum Is Nothing Short of RemarkableAlthough AMD continues firing on all cylinders, with a nice chunk of share taken away from its top rival Intel (INTC) in the PC space, AMD's valuation is tough to get behind. At writing, the stock trades at 11.1 times sales and 42.1 times trailing earnings. That's not at all expensive, given AMD's expected growth for 2021.
With AMD's management upgrading its revenue growth guidance to 65% from 60% for the full year, there's still much optimism already baked into the share price here.
Moving forward, it may be tougher to maintain such levels of growth, given competitive pressures that could weigh across both the CPU and GPU fronts. The real question investors should ask themselves is if AMD can continue flexing its muscles at the expense of the competition.
Supply chains issues have been a major sore spot for the chipmakers, and AMD has not been immune. Still, it has done a respectable job of navigating through industry headwinds. Should AMD continue holding its own, as Intel stumbles on its own set of COVID-induced issues on the manufacturing front, more share-taking could ensue.
Keeping the Pressure on IntelThough Intel has a very ambitious plan to regain its lead in 2025, don't count on AMD to back down without a fight. Indeed, AMD's management sounded as confident as ever with its own promising product roadmap, which should fuel impressive growth for years to come.
At this pace, AMD is likely to continue maintaining its edge over Intel in the red-hot PC space.
However, it is worth noting that the tides could change in as little as two years, leaving little room for error. Intel has a new CEO in Patrick Gelsinger, a man who shouldn't be underestimated. With AMD's brilliant CEO Lisa Su continuing to impress, though, the tides should stay in AMD's favor, even as Intel gets aggressive in an attempt to claw its share back.
Intel Isn't the Only CompetitorEven if AMD can outpace Intel on the PC-based CPU front, Nvidia (NVDA) and Apple (AAPL) could evolve to become more significant threats over the next decade.
On the GPU side, Nvidia looks unmatched. Although AMD is more about CPUs than GPUs, the rise of the metaverse will bring forth an increased need for graphics-processing power. Without a distinct edge in the GPU space, AMD may have to resort to discounting as Nvidia continues to expand its lead.
Furthermore, Apple and its new line of M-series SoCs could cause the broader PC market to cool off over the coming years.
Undoubtedly, gaming and server products are likely to keep most users from switching to Mac. Still, given Apple's ability to adapt, one shouldn't discount the odds that the tech titan moves into the gaming and enterprise space to bolster the Mac's growth prospects.
Indeed, Apple already has the hardware down, with truly magnificent benchmarks on a per-watt basis. It just needs to cater to a broader range of audiences, specifically within the realm of computer games and business solutions.
With Apple Arcade and Apple Business Essentials, the company has a foundation to scale up to become a credible threat to PC growth. For now, AMD investors shouldn't make too much of Apple's innovations on the Mac side.
In due time, though, Apple could play the role of a disruptor as the Mac becomes more capable. Indeed, game-changing hardware, such as the M1 Pro and Max chips, which boast magnificent low-power CPU and GPU performance, can only be a game-changer if it can be used for a broader range of applications like PC.
Wall Street's TakeTurning to Wall Street, Advanced Micro Devices has a Strong Buy consensus rating, based on 14 Buys and nine Holds assigned in the past three months. The average Advanced Micro Devices price target of $141.95 implies 3.3% upside potential.
Analyst price targets range from a low of $113 per share to a high of $180 per share.
The Bottom Line on AMD StockAMD is such an incredible performer that it's hard to be bearish on the stock, especially with its proven management team. Still, the competitive pressures are prominent across all sides.
As the world shifts gears into the metaverse, AMD's transition may be bumpier than the likes of an Apple or an Nvidia. For that reason, I'd much rather wait for a steeper pullback in AMD stock before getting in.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
Apple (AAPL) stock broke out in a big way this past week, with shares pole-vaulting over 10%, propelling the stock to a new all-time high just north of the $175 mark.
Those who slept on Apple likely did not have much time to get in on the upside move, as Morgan Stanley (MS) slapped the tech titan with a new Street-high price target of $200.
It's quite remarkable that Apple was able to blast off in spite of the recent report that showed the impact of supply chain shortages and its impact on demand for the iPhone 13.
Undoubtedly, Apple told its suppliers that demand was slowing. Given how influential the company's flagship phone is to the business, one would have thought production halts would have resulted in a steep sell-off. Nobody would have held it against Apple if its stock sagged alongside most other tech stocks going into early December.
Apple stock held its own, though, maintaining resilience in the face of sector-wide volatility, and that's a true testament to its staying power.
As Apple looks to power higher, I think it could lead the FAANG cohort en route to the $3-trillion market cap mark. Even after a remarkable rally, I remain bullish on the stock and think it has room to run as it makes up for lost time. (See Analysts’ Top Stocks on TipRanks)
What Supported Apple Stock?It's not just about the iPhone anymore. If it was, Apple stock would probably be back below the $140 mark.
Instead, investors seem bullish over the long-term fundamentals, which could improve substantially. With an ambitious report that noted the Apple Car could launch in 2025 with driverless capabilities, and a report from Ming-Chi Kuo that noted an AR headset that could land in the back half of 2022, analysts have had to change some inputs in their financial models.
Undoubtedly, an AR, VR, or mixed-reality headset from Apple would be a positive surprise that could give CEO Tim Cook his long-awaited "one more thing" moment since pulling the curtain on the Apple Watch.
Metaverse HypeThe timing of such a headset has made the company a prime target of the recent bout of metaverse hype inspired by Meta Platforms (FB) just over a month ago.
While Meta is undoubtedly a go-to play to expose oneself to the metaverse, Apple is arguably a smarter way to play it. Why? Apple knows when a next-generation technology is ready for prime time. It always has.
The metaverse remains abstract for many people who've yet to experience it for themselves, either through a pair of VR goggles or through virtual gaming worlds like those built on Roblox (RBLX).
The metaverse holds potential, and the ongoing COVID-19 pandemic could continue to accelerate its move to prime time. Could Apple's headset be ready for next year, as some think? If it is, Apple stock's latest run may just be an appetizer for an even more significant rally, potentially past the $200 mark.
Meta may be the more obvious metaverse play for now, but this could change once Apple deems it's ready to reinvent the mixed-reality headset.
Indeed, all firms engaged with the metaverse could stand to benefit once Apple does look to bring the metaverse into the mainstream. Still, at just 30.5 times trailing earnings, Apple stock seems like one of the cheapest ways to play the trend, given its ability to dominate.
Apple Car HypeFurther, with a potential Apple Car on the way in as little as three years following Kuo's predicted release of an AR headset, Apple stock could find itself on the receiving end of even more price target boosts.
Indeed, the growth in new markets like AR and EVs has the potential to be unfathomable for Apple.
As we learn more, expect Apple stock to continue marching higher, even if iPhone sales fall short. Apple already has its sights set on where the puck is headed next.
Wall Street's TakeAccording to TipRanks’ analyst rating consensus, AAPL stock comes in as a Strong Buy. Out of 28 analyst ratings, there are 22 Buy recommendations, five Hold recommendations, and one Sell recommendation.
The average Apple price target is $169.88. Analyst price targets range from a low of $90 per share to a high of $200 per share.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >