AMD stock is tracking the rebound of the overall chip industry, after a year of slow sales. But the Santa Clara, Calif.-based chip developer, and choice of today's IBD 50 Stocks To Watch column, has above-average prospects.
XAdvanced Micro Devices (AMD), both an IBD 50 and Leaderboard listing, is sitting atop a four-month advance that has left shares up more than 80% following a brief pullback in September and October. The stock started February with a 6% jump. That move placed it briefly in a buy range on a rebound from support at its 10-week moving average.
Though you wouldn't know it from its behavior, AMD stock, like many chip stocks, is in the midst of a pronounced turnaround, adhering to a rebounding industry cycle. Chip sales slumped in 2019, after reaching a peak in the prior year. The Semiconductor Industry Association forecasts a moderate rebound to mid-single digit growth over the next two years.
AMD Stock: Hot Prospects
The prospects for AMD are significantly brighter. Under Chief Executive Lisa Su, who took her post in 2014, AMD launched its Ryzen PC processors and Epyc server chips in 2017. It overtook Intel (INTC) as the industry's leading producer of the industry's most compact central processing units, or CPUs, for personal computers and servers.
AMD currently offers chips designed at circuit widths of 7 nanometers. Intel smallest chips are in the 10 nanometer range. AMD is now developing 5 nanometer chips. A nanometer is one millionth of a millimeter, roughly equivalent to the difference between an inch and a mile.
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AMD has applied that leading edge advantage not only to taking CPU market share from Intel, but also in going toe-to-toe with graphics chip leader Nvidia (NVDA). As a result, in a year when Intel is forecast to see a 2% earnings gain, and Nvidia earnings are bouncing out of more than a year of declines and into a 31% gain for fiscal 2021, consensus views call for AMD to post an 81% profit advance, according to FactSet Research.
Revenue growth is seen bouncing back 30%, after slowing to a 4% increase for 2019. The bounce got underway with a 300% earnings-per-share spike and a 50% surge in revenue in the company's fourth quarter. For Q1, consensus views project a 217% EPS gain and a 42% revenue pop to $1.8 billion.
AMD's Credentials
AMD has topped earnings expectations in two of the past four quarters, once by 3%, once by 20%. Results in the other two quarters just met expectations.
All of AMD's rating credentials are in order, with a 99 Composite Rating, a 97 Relative Strength Rating and a B+ Accumulation/Distribution grade. All are at or near top-shelf ratings.
AMD stock on Wednesday traded a bit more than 6% below its Jan. 25 record high. It has half-position status on Leaderboard.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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