Advanced Micro Devices (NASDAQ:AMD) sits at the intersection of multiple catalysts, creating crosscurrents that investors might find difficult to navigate. Most recently, the stock slipped in the wake of the semiconductor maker’s quarterly results. However, shares immediately bounced back in Thursday’s action, putting them on track for their sixth highest finish in the past seven sessions.
Among the other factors impacting investor decision-making, global tensions between China and the US threaten to further exacerbate a chip supply crisis. Partly in response to this danger, Washington is working on a CHIPS bill meant to encourage US-based production.
Given this macro backdrop, is AMD a buy even after its recent upswing?
Earnings, Geopolitics & Legislation
Earlier this week, AMD (AMD) reported strong Q2 earnings. Shares dipped in the immediate aftermath, however, dragged down by concerns about the firm’s guidance.
For the latest quarter, the company earned $1.05 a share on $6.55B in revenue. This was helped by 83% growth in data center sales. The chip giant also saw strength in the company’s client segment, which includes PC processors, as sales rose 25% year-over-year to $2.2B.
Turning to the macro issues, pressure continues to mount on the semiconductor market with China and the US focused on Taiwan, the home of Taiwan Semiconductor (TSM), a pivotal piece in the chip world. House Speaker Nancy Pelosi went to Taiwan this week, where she met with semiconductor industry leaders.
Adding further fuel is the recent CHIPS Act that has been passed on a bipartisan basis and is expected to go into law. The bill will include $52B in subsidies for domestic production and a previously reported investment tax credit for chip plants. The bill will not only lend support to AMD but to others including NVIDIA (NVDA) and Intel (INTC).
AMD has been on a tear recently, although this has only cut losses it posted earlier in the year. Shares are down about 30% for 2022. However, over the past 16 trading sessions, the stock has surged about 36%.
The stock has ended in positive territory in 13 of the last 16 trading days. Meanwhile, the stock has climbed an additional 6% in Thursday’s intraday trading.
AMD has underperformed its INTC for most of 2022. However, the recent surge has allowed the stock to catch up to its closest rival. Since the beginning of July, AMD has climbed about 33% (not including Thursday’s gains). INTC is basically flat during that time, causing some investors to wonder if that stock has become an undervalued buying opportunity.
Is AMD a Buy?
The overwhelming share of investment analysts on Wall Street view AMD from a bullish perspective. Only one of the 37 analysts surveyed by Seeking Alpha have classified the stock as a Strong Sell, with another 10 seeing it as a Hold.
Otherwise, the analyst community has expressed optimism. This takes the form of 19 Strong Buy ratings and seven Buy opinions.
The average price target sits at $122.09 a share, which is roughly $20 higher from the stock’s current $102 a share price. The outliers see the stock as high as $200 a share and as low as $80 a share.
Seeking Alpha’s Quantitative Ratings also point to a bullish outlook, culminating in a Strong Buy signal. The system of grading quantitative measures gives AMD an A for both growth and profitability. The stock gets a B+ for momentum and a C+ for valuation.
See a complete breakdown of AMD’s ratings below:
Seeking Alpha contributors compete with the bullish stance. For instance, Stone Fox Capital labeled the company as a Strong Buy, stating “After another booming quarter, Advanced Micro Devices should finally trade back above $100 for good.”
Additionally, Steven Cress, head of quantitative strategies at Seeking Alpha, sees optimistic signs for AMD. He said: “Despite Information Technology being -18.2% YTD, beaten-down growth stocks with great fundamentals and attractive valuations stand to benefit.” Cress feels that Advanced Micro Devices is one of these stocks.