When it comes to semiconductor developers, Advanced Micro Devices (NASDAQ:AMD) and CEO Lisa Su are well-recognized entities within Wall Street. However, it’s possible that market optimism for AMD’s stock could be slightly over-inflated. For the time being, AMD stock reluctantly receives a grade of “B.”
The robust revenue-generating capacity of AMD might make the recent dip in price from $200 per share tempting. But it’s crucial to understand that not all price reductions should be seen as buying opportunities.
Piper Sandler analyst, Harsh Kumar, is clearly an advocate for AMD. He recently assigned an “overweight” rating and a $175 price target to the company’s stock. After engaging with company management, Kumar stated he was “extremely impressed.”
“Advanced Micro Devices’ MI300 chip is ‘performing very well,'” Kumar affirmed, adding that he envisages a bright future for the company in the latter part of the year.
Kumar’s accolades are not unwarranted. The 85% YoY growth in the company’s Client segment revenue was evident in the first quarter of this year.
Additionally, the Data Center segment revenue, which includes revenue from AI-compatible chips, saw an 80% growth. The company is “expecting $4 billion in AI processor sales for the full year.” However, it’s worth considering whether this level of optimism expressed by AMD and analysts like Kumar could potentially be an issue.
Investing in AMD’s stock isn’t a bad move per se. However, with the company’s earnings report expected in less than a month, it’s wise to be prepared for a variety of potential outcomes.
Investors should ideally balance AMD’s impressive revenue growth with the company’s projections and current valuation, especially as the earnings announcement draws near. This is particularly relevant given that AMD’s GAAP trailing 12-month P/E ratio is currently over 200x, implying that the company would need to release some exceptional quarterly figures to justify its valuation.
Kumar isn’t incorrect in stating that AMD has “bright prospects”. The data undeniably points to AMD as a significant revenue grower. However, it might be worthwhile to hold off on buying the stock until after the company’s upcoming quarterly earnings report.
Although there are no issues with AMD as a business, we currently rate the stock a “B,” indicative of a cautiously optimistic stance.
At the time of publication, neither the author nor the editor held any stake, direct or indirect, in the securities discussed in this article.
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