Advanced Micro Devices (AMD) is a global semiconductor company. Its stock is now up over 40% from its late-October lows on the back of a solid third-quarter earnings report and renewed optimism over the chip maker's role in the metaverse. At one point, it was up over 55%.
The stock popped immediately following the encouraging news that AMD had partnered with Meta Platforms (FB) at a data center event. It was big news for AMD, especially with all the hype surrounding Meta's remarkable push to what could be the next big thing after smartphones.
There's a lot to love with AMD following the Meta deal. With such incredibly good news powering AMD's recent rise already baked in though, is it too late to buy the stock? Or, is the recent pullback in the past two days a buying opportunity?
Despite the great fundamentals, new long-term catalysts, and powerful technological trends to get genuinely excited about, I am neutral on the stock, primarily due to valuation concerns. (See Analysts’ Top Stocks on TipRanks)
Will AMD Pass Intel in Market Cap?Undoubtedly, AMD CEO Lisa Su has done a magnificent job of bringing out the best of the chip company, after many years in the shadows of its top rival Intel (INTC).
The deal with Meta further solidifies AMD's dominance in the chip world and should act as a gut-punch to previous chip kingpin Intel, a firm that's desperately trying to get up to speed with its promising catch-up plan.
As Intel looks to play the game of catch-up to regain the lead in the chip world, AMD has plans of its own. Undoubtedly, it will be tough to catch up to Lisa Su and her firm, as it looks to take its growth to the next level with Meta at its side. Indeed, AMD is taking share from Intel, a trend that I believe will be tough to reverse over the medium term.
With shares of AMD and INTC heading in opposite directions, the two chip giants are bound to collide on the market cap front, with a potential passing of the torch possible at some point down the road. I think it's just a matter of time, despite Intel's encouraging multi-year plan.
AMD's Quarter Was Really That GoodIt's hard to find hair on AMD's third quarter, which revealed incredible strength in the back half of October.
To put it simply, the company is firing on all cylinders, with a solid beat and full-year revenue growth guidance raised to 65% from 60%. The company has done a decent job of mitigating supply chain risks and should be in even better shape as COVID-19-induced disruptions resolve themselves in the new year.
Indeed, AMD has continued to raise the bar on guidance throughout the year. That's the type of momentum behind the firm. While investors are piling in on the back of the perfect storm of positive events, patient investors may have a shot to get a better price as they wait for AMD to cool off after what's been a jaw-dropping run.
Wall Street's TakeAccording to Wall Street's consensus rating, AMD stock comes in as a Moderate Buy. Out of 22 analyst ratings, there are 14 Buys and eight Hold ratings.
The average Advanced Micro Devices price target is $143.45, implying just 0.8% upside potential. Analyst price targets range from a low of $113 to a high of $180.
The Bottom Line on AMD StockWith so much enthusiasm placed on Meta and the metaverse, many investors are likely to continue paying up a hefty premium for any type of indirect exposure.
At about 44 times trailing earnings, the stakes are high with AMD. While it can continue outpacing Intel, it'd be unwise to count such a long-time rival entirely out of the game.
Disclosure: Joey Frenette doesn't own shares of any mentioned companies at the time of publication.
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