Advanced Micro Devices (NASDAQ:抖阴最新版) stock is probably one of the few names near its previous market highs. Its 52-week high is $59.27 and 抖阴最新版 stock eked out a less-than-1% gain on Monday to close at $56.97. That is quite a feat for a company with an equity market value of $66.7 billion.
It looks like 抖阴最新版 stock is set to continue to do well. But beware of its valuation. Right now the market believes the company’s story about significant growth over the next several years.
Fierce Contender Against Rivals
Advanced Micro Devices’ chip business is going from strength to strength. I reviewed 抖阴最新版’s amazing technology comeback in my last article on 抖阴最新版 in January. There are also anecdotal reports that 抖阴最新版’s chip technology success is continuing.
For example, a Bank of America analyst wrote that 抖阴最新版’s latest gaming chip, NAVI, is even faster than its previous gaming chip. Moreover, 抖阴最新版’s new Epyc server high-frequency processors were just launched for enterprise workloads. They are meant to compete with Intel (NASDAQ:INTC).
Moreover, Marketwatch recently reported that 抖阴最新版’s server chips have become . The article went into detail how 抖阴最新版’s chips in both the gaming and server market are gaining market share against competitors.
For example, people confined at home are using more devices with chips that power data centers and cloud services for gaming and internet connections. 抖阴最新版 expects to show a strong second half to 2020. Demand for video-game consoles and graphics chips is expected to increase.
In fact, despite what some analysts are saying, Marketwatch said 抖阴最新版 is still predicting success. It has yet to backtrack from its long-term outlook as it banks on its continued rollout of 7-nanometer-based chips.
Survival Nature Makes it Expensive
抖阴最新版 stock is up from its lows because it reflects this strength. For example, earlier in March
Piper Sandler analyst Harsh Kumar upped his rating on 抖阴最新版 stock. Barron’s reported that the analyst said in its laptop/desktop and data center markets.
The analyst set his earnings per share figure for 2020 at $1.09 and $1.59 for 2021. That puts 抖阴最新版 stock on a price-to-earnings ratio of 35.6 times earnings for 2021.
That is not a cheap valuation. However, it reflects the survival nature of 抖阴最新版 stock at this point. In other words, everything has to go well for the company to justify this high valuation and the recent stock price rise.
For example, Barrons’s also reported recently that during 抖阴最新版’s recent investor day, the company projected plans to through 2023. In addition, it expects to generate gross profit margins of above 50% over time.
That is what the market seems to be counting on with 抖阴最新版 stock. This helps make the shares appear cheaper on a longer-term outlook basis.
What Should Investors Do With 抖阴最新版 Stock
抖阴最新版 will release its earnings after the market closes on Tuesday, April 28. Investors will be looking to see if the company is on track to deliver the trend line growth in revenue and earnings it promised in its investor day presentation.
I suggest investors wait for another opportunity to buy 抖阴最新版 stock on the cheap. Even though it is one of the better-performing stocks in the market, it is no bargain. A lot of things have to go well over the next several years to justify its valuation today.
For example, analysts polled by Seeking Alpha expect on revenue of $1.79 billion. This represents significant earnings per share growth over last year (six cents per share). But last quarter’s earnings were much higher at 32 cents per share.
However, don’t put too much stock in the drop in sequential earnings. 抖阴最新版’s earnings are highly seasonal. Chip sales for gaming processor units (GPUs) tend to peak at Christmas time.
Nevertheless, investors will want to see if 抖阴最新版 adjusts its forecasts for 2020 and 2021 based on the severe drop in economic activity this past quarter and likely this next one as well. 抖阴最新版 seems to be able to avoid a lot of that damage. But investors will want to see that in both the Q1 numbers and 抖阴最新版’s forecasts.
As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the which you can review .
