Over the past 52 weeks, Advanced Micro Devices (NASDAQ:AMD) has demonstrated remarkable growth, with its stock surging by more than 126%. This surge comes amid a robust outlook for the global semiconductor market, projected to reach $736 billion by 2027 according to Statista. AMD stands poised for further success, boasting a diversified presence across CPUs, GPUs, and enterprise data centers. The company’s momentum has been fueled by recent product launches, including the highly acclaimed Instinct MI300 data center GPUs, enabling AMD to secure a notable 25% market share in the data center segment last quarter, intensifying competition with industry giants like Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC).
However, as the frenzy surrounding AI-driven growth lifts related stocks to unprecedented heights, investors may question whether AMD still offers an appealing risk-reward proposition following its doubling in value over the past year. Let’s delve deeper into AMD’s current prospects and the insights from Wall Street analysts.
Is AMD Stock Still a Smart Investment?
While Nvidia dominates the GPU sector and Intel maintains leadership in CPUs, AMD distinguishes itself with a diverse range of semiconductor solutions, excelling in both computing and graphics technologies. Beyond PCs and data centers, AMD has established a significant presence in gaming and embedded systems, reflecting its commitment to innovation. This innovation has translated into exceptional stock performance, with AMD shares soaring by 170.16% in the past 52 weeks.
Notably, CEO Dr. Lisa Su recently divested AMD shares worth $20 million, executing sales in three tranches under a Rule 10b5-1 trading plan adopted last November.
Despite the substantial rally, AMD appears undervalued considering its potential for future growth. This assertion is supported by AMD’s price/adjusted earnings to growth (PEG) ratio of 1.13, well below the broader tech sector’s median PEG ratio of 2.03 and significantly lower than AMD’s 5-year average PEG valuation of 1.47. Moreover, AMD’s stock is priced at 11.05 times forward sales, a favorable valuation compared to Nvidia’s multiple of 17.68x sales.
AMD Excels in Q4 Revenue
In its Q4 2023 earnings report released in late January, AMD exceeded expectations in revenue, which climbed 10% year-over-year to $6.2 billion. Earnings per share (EPS) of $0.77 met analysts’ expectations. Looking ahead, AMD anticipates sequential declines in its client, embedded, and gaming segments for the current quarter, projecting Q1 revenue of $5.4 billion, slightly below analysts’ average estimate of $5.75 billion.
While the quarterly results didn’t match Nvidia’s exceptional performance, the cautious guidance suggests that AMD won’t face unattainable earnings expectations in the next quarterly release either. Given AMD’s track record of surpassing earnings estimates, these projections may prove conservative.
Analysts’ Outlook for AMD Stock
Wall Street analysts remain bullish on AMD, with a consensus rating of “strong buy” based on recommendations from 33 analysts. Among them, 27 rate AMD as a “strong buy,” with only 1 “moderate-buy” and 5 “holds.” The average price target of $185.11 implies a 5% upside potential from current levels, while the highest forecast of $270 represents a premium of approximately 53%.
The Verdict on AMD Stock
Despite its remarkable performance over the past year, AMD stock continues to offer an appealing blend of growth and value, underscored by its reasonable PEG ratio. For investors seeking exposure to the dynamic semiconductor sector without overpaying for growth, AMD presents an opportunity to invest in a company with a strong portfolio of semiconductor solutions and a proven track record of agile execution in a rapidly evolving industry.
Featured Image: Megapixl
