Analysts are upbeat about AMD stock price: should you buy or sell?

AMD stock price has bounced back in the past few days as investors cheered the company’s upbeat financial results. It has also jumped as the market predicts that it will be the next big player in the artificial intelligence (AI) industry. It rose to a high of $102.85, its highest level since March 28, and 35% above the current level. 

AMD earnings recap

AMD and other semiconductor companies are facing a double-whammy: there is a risk that the AI bubble is bursting, and export controls from China. On the AI bubble, some companies like Microsoft have started to pause or end their data center expansion in key countries. 

NVIDIA warned that export controls to China would have a $5.5 billion impact on its business. AMD also warned that limiting exports of key technologies to the second-biggest economy, would have a direct impact on its revenue.

The company published its financial results last week, which showed it was continuing to gain market share in the data center industry. Its revenue rose to over $7.43 billion, up by about 36% from the same period last year. The figure was a big increase from the expected $7.35 billion. 

AMD’s gross profit jumped by 46% to $3.73 billion as its gross margin jumped to 50% from 47% a year earlier. Most importantly, the net income jumped by 476% to $709 million, while the diluted EPS jumped by 526% to 44 cents. 

This growth was mostly because AMD has become a major player in the data center industry, which has been growing in the past few months. Its data center GPUs have become the closest competitor to NVIDIA now that Intel’s business is struggling. 

The data center business generated revenues of $3.67 billion in the first quarter, a 57% increase from the same period last year. 

Most importantly, there are signs that the client and gaming, and embedded businesses that have struggled in the past have started to improve. The client and gaming segment made $2.9 billion, up by 28% from Q1’24, while the embedded revenue fell by just 3%.

Analysts are upbeat about AMD 

Wall Street analysts are upbeat about AMD’s performance in the coming quarters. The average estimate is that the company’s revenue will rise by about 26.80% in the first quarter to $7.4 billion. This forecast is in line with what the management guided as it expects its revenue to be minus or plus $300 million that level.

The management expects that its gross margins will drop to 43% because of $800 million in charges related to Trump’s export curbs. Its gross margin would have continued rising to 54%, excluding these curbs.

AMD tends to be highly conservative when it issues its forward guidance. As such, there is a likelihood that the company’s business will keep doing better than expected.

The average AMD stock price forecast is $127, up from the current $102. Most analysts cite its growing market share in the AI industry and the fair valuation since it has a forward PE ratio of 25.45. 

AMD stock price analysis

AMD stock chart | Source: TradingView

The daily chart shows that the AMD share price has rebounded from a low of $76.45 in April to $102.85 today. It has jumped above the crucial resistance level at $93.55, its lowest level in October 2023. 

The stock has moved above the 50-day Exponential Moving Average, while the MACD indicator has moved above the zero line. Also, the Relative Strength Index (RSI) has jumped above the neutral point at 50.