Last Minute Thought: Buy or Sell Advanced Micro Devices (AMD) Stock Before 3Q18 Earnings?


OK, Advanced Micro Devices (AMD). It’s officially earnings season again, and time to show investors what you’re made of. AMD is set to release third-quarter 2018 results after the market close today. With shares of the chip giant climbing over 40% since it last reported in late July, now’s a great time to take a closer look at what investors should expect.

Heading into the print, RBC Capital analyst Mitch Steves believes expectations are muted with some interest around potential PC share gains (mid-high end) as Intel continues to fill low-end PCs with 14nm chips. Importantly, the analyst thinks AMD will continue to be volatile and trade at a high Beta in line with the market.

“While solid or poor results should certainly move the stock, we think the bigger story is Q1 of CY19 when 7nm chips are released. With this in mind, we are more focused on the Server presentation in San Francisco on November 6 relative to earnings this quarter. Unless there is a material change to the server story, we think the stock will remain as a high Beta play on the overall tech sector. Net Net: we would add to positions on weakness (days the NASDAQ is down materially) and wait for 2019. We think the AMD story is a 2019/2020 story where the company could gain notable share in servers and potentially mid-high-end PCs as well. Finally, we emphasize that this continues to be a 2019 play given the timing of the 7nm product launch (Q1 2019),” Steves opined.

As such, Steves reiterates an Outperform rating on AMD stock, with a price target of $40, which represents a potential upside of 71% from where the stock is currently trading. (To watch Steves’ track record, click here)

Ultimately, Wall Street is just not sure yet about this chip giant, but the optimists still win out in the bigger picture. TipRanks indicates a cautious analyst consensus circling AMD shares. Out of 24 analysts polled in the last 3 months, 10 rate a Buy on AMD, 12 maintain a Hold, while only 2 issue a Sell. The 12-month average price target notably stands at $28.73, marking a healthy return potential of 24% from current levels. (See AMD’s price targets and analyst ratings on TipRanks)

 

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