Advanced Micro Devices (AMD) Stock Is Beaten Down, Is It Worth a Buy?

While investors are stepping away from Advanced Micro Devices (AMD) stock amid a near 8% drop in the share price just in the last day, top-rated blogger Stone Fox Capital (SFC) is calling on investors to take advantage of a “rare opportunity” to own a tech company while its on a major dip. The blogger says now is the best time to buy, while the chip company is in front of a massive new product release. During a November 6th event called the Next Horizon, AMD highlighted a new opportunity in the datacenter, reinforcing the blogger’s bullish investment thesis.

“As the market still frets over weak Q3 revenues and disappointing Q4 guidance, the long-term datacenter story is only improving over time. AMD now forecasts that the total addressable market for the datacenter will reach $29 billion, up from only $20 billion now. The market forecast is even further broken out to $17 billion for CPU and $12 billion for GPU,” SFC says.

At the Next Horizon event, AMD announced that it now offers a chip through Amazon Web Services, which is huge news for the chip world. The blogger points out that “the deal does reduce the risk in the investment story. Remember that AWS controls over 30% of the global cloud computing market so getting this deal reduces any risk that AMD is left out of the top cloud platform.”

SFC points out that 2019 revenue estimates have been very light, but that the numbers aren’t factoring in the full datacenter growth opportunity: “A forecast of only reaching 6.5% market share in 2019 suggests limited growth despite the highly anticipated release of Epyc 2 during the year and the intent to end the year with double-digit market share,” the blogger added.

Moreover, SFC says the key investor takeaway is that analysts have overreacted to what was considered “weak” AMD Q4 guidance, which the company projected to be around $1.45 billion (consensus was $1.71 billion). The revenue growth forecasted over the next two years appears based on just “normal” (as the blogger puts it) server CPU market share gains. The PC market and potential for rebound in blockchain are two potential opportunities for AMD that could bring it closer to the blogger’s 2020 price target of $10 billion in sales and an EPS of $1.50. Predictions of datacenter growth for 2021 suggest the trend will be a benefit for the stock down the line.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star blogger SFC has a yearly average return of 11% and a 55% success rate. SFC has a 7.6% average return when recommending AMD, and is ranked #42 out of 4,887 analysts.

TipRanks has reviewed 25 analysts who have their eye on the chip market. Out of those surveyed, 12 are bullish, 11 are sidelined and 2 are bearish on AMD stock. The consensus price target is $25.86, showing an upside of 35%. (See AMD’s price targets and analyst ratings on TipRanks)

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