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AMD Is a Great Company, But the Stock’s Valuation Looks Full

Christmas has arrived early for Advanced Micro Devices (AMD) stock, or you could possibly say it has been Christmas all year long for the semi-conductor giant.

Along with nesting up the very highest echelons of the S&P 500 top 2019 performers, AMD has gained 108% in the market year-to-date and still just miles away from record highs.

The company’s stellar year has seen it take advantage of Intel’s shortages at the low end of the CPU market. Although the sector has always somewhat been AMD’s go-to niche, the company pushed back on the idea that Intel’s issues had anything to do with its recent success. The company might want to retract that statement right now as some interesting figures show it’s leaving one of their main competitors in the dust.

German retailer Mindfactory just announced that November sales of AMD processors are outselling Intel’s by 5 to 1, with 25000 sold compared its competitor’s 5000. In fact, AMD has been hitting the 80% chunk of the market since the July launch of its Ryzen 3rd gen processors, increasing an already healthy 68% market share to 79%.

AMD’s dominance in Europe is also reflected in a recent survey by the European Hardware Association (EHA) which concluded 60% of tech enthusiasts expressed a preference for AMD desktop processors over its rival. This reverses last year’s trend and can be put down to the impact the Ryzen 3000 processors have had this year.

Europe is not the only territory providing good news for the CPU manufacturer. Remarkable scenes were reported on November 30 at the Japanese launch of the AMD Ryzen 9 3950X 16 Core CPU processor. Stores sold out before they had even opened, with DIY enthusiasts queuing during the night to get hold of the flagship product. AMD’s Ryzen Threadripper 3970X sales were also given a boost the same day, alongside a healthy number of consumers buying the 32 core Zen 2 based chip too.

A recent report assessing the microprocessor and GPU markets had Nomura analyst David Wong noting “ongoing AMD share gains” with the 5-star analyst adding, “AMD gained share in data center, desktop, and notebook processors in the September quarter. A rebound in data center processor demand and firmness in PC pricing are supporting a return to overall growth… total server CPU revenues set a record high and that overall processor market ASP reached a 20-year high in the quarter.”

Accordingly, Wong reiterated a Buy rating on AMD, but his $40 price target implies limited upside potential from a valuation perspective. (To watch’s Wong’s track record, click here)

All in all, this soaring chip titan certainly has the Street divided. A consensus breakdown of 11 “buys,” 11 “holds” and 1 “sell” gives AMD a Moderate Buy rating. The average price target of $36.89 suggests downside of nearly 5% might be on the cards. This could be down to analysts believing AMD’s sustained rally has got to come to an end at some point. (See AMD stock analysis on TipRanks)

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