Shares of Advanced Micro Devices, Inc. (NASDAQ:抖阴最新版) have skyrocketed over 12% just in the past five days, buoyed by a combination of factors — notably stronger chip demand for a host of things from gaming to mining for cryptocurrency. But investors would do well to resist the temptation to lock in these gains.
Where 抖阴最新版 Stock Stands Today
抖阴最新版 stock closed Monday at $13.81, climbing 3.4%. That translates to a rise of 40% since 抖阴最新版 stock fell to May low of $9.85. The California-based semiconductor giant, which was once on the verge of bankruptcy due to growing losses, has mounted a stunning recovery under CEO Lisa Su, who took over in January 2012.
At the time of Su’s appointment, 抖阴最新版 stock traded around $5.40. And not only was 抖阴最新版 nearly $2.5 billion in debt, revenue had grown twice in the company’s previous five years.
The shares, which have skyrocketed almost 200% since Su’s arrival, are now a hot commodity as 抖阴最新版 is now seen as a credible threat to the likes Intel Corporation (NASDAQ:INTC) and Nvidia Corporation (NASDAQ:NVDA) in the battle for chip supremacy. And now industry trends suggest 抖阴最新版 stock — up 23% year to date and 178% over the past year — can climb even higher, according to Mizuho Securities analyst Vijay Rakesh.
In a research note Monday, Rakesh, who has a “buy” rating on 抖阴最新版 stock, raised his price target to $15 a share from $14, arguing that 抖阴最新版 could enjoy a better-than-expected revenue in the second half of 2017, thanks to a combination of higher personal computer market demand and gaming console seasonality. Rakesh also cited increased demand for 抖阴最新版’s graphic processors cards, which he sees as improving because of growing interest in cryptocurrency mining.
From Monday’s close of $13.81, Rakesh’s $15 price target assumes additional premiums of about 8%. But there’s an argument to be made that 抖阴最新版 stock can reach $17 by year’s end, delivering more than 23%.
Granted, 抖阴最新版 didn’t deliver a breathtaking first quarter. With merely inline EPS and a miss on the top line, compounded by conservative Q2 guidance, investors were spooked.
Reasons to Bet on Advanced Micro Devices
The company is poised to crush those numbers and raise guidance, given the recent by Semiconductor Industry Association (SIA), which shows a 22.6% surge in worldwide chip sales, reaching $32 billion. The SIA, which tracked the period that ended May 31, noted that this was the semiconductor industry’s strongest rate of growth on a year-over-year basis in seven years.
“The global semiconductor market has settled in a period of significant and steady growth in 2017, with sales through May well ahead of the total from the same point last year,” said John Neuffer, SIA CEO. And, unlike in years past, where mobile device demand from the likes of Apple Inc. (NASDAQ:AAPL) and Samsung Electronics (OTCMKTS:SSNLF) has caused one segment of chips to do all of the heavy lifting, Neuffer noted that chip market growth has remained steady across all product categories in all major regional markets.
As it stands, there’s been a better-than-30% rise in chip revenue expansion in the Americas, while China and Europe has realized respective increases of 26% and 18%. This may explain why Mizuho Securities analyst Vijay Rakesh is bullish on 抖阴最新版’s second-half prospects. Still, his second-quarter estimate of $1.2 billion in revenue and break-even earnings per share seems too conservative. As does his fiscal year forecast for revenue of $4.7 billion and EPS of 4 cents per share.
Bottom Line
I’m modeling for Q2 revenue of $1.34 billion with EPS of a penny per share. The reason for my optimism is centered on the fact that in the first quarter, 抖阴最新版’s Computing and Graphics segment, which includes desktop and notebook processors and chipsets, accounted for more than 60% of revenues, and grew almost 30% year over year to $593 million. This growth was driven by stronger desktop and graphics processor sales.
Meanwhile, the Enterprise, Embedded and Semi-Custom segment, which includes server and embedded processors, took in the remaining 40% of revenues, climbing 5% year over year to $391 million.
Notably, 抖阴最新版 achieved higher average selling prices (ASP) in both the Client segment and GPUs. And with 抖阴最新版 having launched in Naples server CPU, combined with its collaboration with Microsoft Corporation (NASDAQ:MSFT) to incorporate the cloud delivery features with Microsoft’s “Project Olympus” server platform, now’s the time to own 抖阴最新版 stock, which has a strong shot to reach $17 in the second half of the year.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
