Advanced Micro Devices(AMD) stock is down since the chipmaker reported fourth-quarter results in late January. With a pullback in shares, some investors may be wondering: Is AMD stock a buy right now?
AMD has staged an amazing turnaround over the past five years, fueled by new products and improved profitability. And AMD stock has climbed as a result.
AMD competes withIntel(INTC) in making central processing units, or CPUs, for personal computers and servers. It also rivalsNvidia(NVDA) in the market for graphics processing units, or GPUs, for PCs, gaming consoles and data centers.
Founded in May 1969, AMD went public in September 1972. AMD shifted to a fabless semiconductor business in March 2009 by spinning off its factories into a joint venture called GlobalFoundries.
Chief Executive Lisa Su Making A Difference
Current Chief Executive Lisa Su took the reins in October 2014. She shepherded the Santa Clara, Calif.-based company into a new era with its Ryzen PC processors and Epyc server chips in 2017.
Under her supervision, AMD jumped ahead of Intel in making CPUs at smaller node sizes, giving its products an edge in speed and performance. AMD is making chips at 7-nanometer scale, while Intel has struggled to make chips at 10-nanometer scale. AMD is now developing chips at 5-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
On July 23,Intel announced a six-month delayin production of its already behind-schedule 7-nanometer processors. Intel now expects to ship its first 7-nanometer processors in late 2022 or early 2023. By that time, AMD could be making 3-nanometer processors, analysts said.
The situation has helped AMD take market share from Intel in PCs and servers. Those gains have buoyed AMD stock.
Chip foundry Taiwan Semiconductor Manufacturing(TSM) produces AMD's chips.
Su also is overseeing a potentially transformative acquisition. On Oct. 27, AMD announced an all-stock deal worth $35 billion to buyXilinx(XLNX) to expand its growing data-center business. However, AMD stock fell on theXilinx acquisition news. Critics said the acquisition complicates AMD's "clean" investor story around market share gains in processors.
Intel Losing Market Share To AMD
In the fourth quarter, Intel regained market share from AMD in CPUs for desktop and notebook PCs, according to Mercury Research. That ended a three-year streak of market share gains by AMD in the PC segment on a quarter-to-quarter basis. AMD also suffered supply constraints with its contract manufacturer in the period.
AMD's unit share of desktop PC processor sales was 19.3% in the fourth quarter, down from 20.1% in the third quarter. However, it was up from 18.3% in the year-earlier period.
AMD's unit share of notebook PC processor sales was 19% in the December quarter, down from 20.2% in the September quarter. But it was up from 16.2% in the year-earlier period.
However, AMD continued to gain share in CPUs for servers during the fourth quarter. Its server CPU market share was 7.1% in the December quarter. That compares with 6.6% in the September quarter and 4.5% in the year-earlier quarter, Mercury said.
Advanced Micro Devices News: New PC, Gaming Chips
On Oct. 8, AMD introduced its next-generation Ryzen processors for desktop computers. It described itsRyzen 5000 series central processing unitsas the "fastest gaming CPUs in the world." The Ryzen 5000 series products are aimed at PC gamers and content creators.
On Jan. 12, during a keynote speech at the virtual CES 2021 tech conference, Chief Executive Su introduced the company's newRyzen 5000 Series mobile processors. She called the chips "the most powerful PC processors ever built for ultrathin and gaming notebooks." However, AMD stock fell 2% that day.
The next potential catalyst for AMD stock will be March 3. On that date, AMD plans to introduce the newest addition to its Radeon RX family of high-performance graphic cards.
AMD Fundamental Analysis
AMD earned an adjusted 52 cents a share on sales of $3.24 billion in the December quarter. Analysts expected AMD earnings of 47 cents a share on sales of $3.02 billion. On a year-over-year basis, AMD earnings rose 63% while sales climbed 53%.
For the current quarter, AMD expects to generate revenue of $3.2 billion, up 79% from the year-earlier period. Wall Street analysts predicted AMD sales of $2.73 billion in the first quarter.
For the full year, AMD expects sales to rise 37% to $13.38 billion. Analysts had been looking for 2021 revenue of $12.24 billion.
At least six Wall Street analysts raised their price targets on AMD stock after the company's earnings report.
AMD Stock Technical Analysis
AMD stock sank to a nearly four-decade low of 1.61 a share in July 2015 before starting its epic recovery.
On Nov. 30, AMD stock broke out of a fourth-stage,double-bottom basewith abuy pointof 88.82, according toIBD MarketSmithcharts. It notched a record high of 99.23 on Jan. 11.
For two months after itsbreakout, AMD stock traded in and out of the5% chase zone. However, it triggered around-trip sell signalafter retreating from a breakout gain of more than 10% back to below the buy point.
AMD stock flashed anothersell signalon Feb. 23 when it dropped 7% to 8% below the buy point of its breakout. It ended the regular session Feb. 26 in the sell zone at 84.51.
AMD stock has anIBD Relative Strength Ratingof 62. That means it has outperformed 62% of stocks on the market over the past 12 months. The best growth stocks typically have RS Ratings of at least 80. And AMD'srelative strength linehas declined since mid-December as it underperforms the S&P 500 index.
It has anIBD Accumulation/Distribution Ratingof B-, indicating some institutional buying of AMD shares.
AMD stock is on theIBD 50 listof top-performing growth stocks.
Is AMD Stock A Buy Right Now?
AMD stock is not a buy right now. It is trading well below its50-day moving average line, a negative sign.
AMD stock will need to form anew basein theright market conditionsbefore setting a new potential buy point. Check outIBD's Big Picture columnfor the current market direction.
AMD stock has anIBD Composite Ratingof 95 out of a best-possible 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
TheIBD Stock Checkuptool ranks AMD in fourth place in IBD's fabless semiconductor industry group. So, there are better stocks in the group to consider.
Also, the fabless chipmaker group ranks No. 88 out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in the top 40 industry groups.
To find thebest stocks to buy or watch, check outIBD Stock Listsas well as IBD'sLeaderboard,MarketSmithandSwingTraderplatforms.