New AMD Price Target as Demand Pushes All-Time High
Shares of Advanced Micro Devices ($AMD) have gained 183% year to date. Unlike many of its competitors, AMD managed to avoid a major selloff this summer. It’s been one of the strongest names in the AI-focused semiconductor sector.
Now that semiconductors are leading markets to new highs again, Advanced Micro Devices is also poised to make new highs. The stock has formed an A-B-C-D pattern, an old-school technical formation that can be used to project future prices.
Based on that technical formation, and considering the sector’s relative strength and overall market momentum, our new price target for Advanced Micro Devices is $750.
Wall Street’s Price Targets
Analysts are bullish on the stock. Earlier this week, Citibank analyst Atif Malik maintained his buy rating on the stock, while raising his price target from $575 to $800.
BNP Paribas raised its price target from $600 to $960, the highest on the street, while maintaining its outperform rating on the stock. Stifel raised its target price from $635 to $700.
What is the catalyst for these bullish targets? According to BNP Paribas’ Karl Ackerman, AMD has evolved from a simple component manufacturer into a full-stack AI systems infrastructure platform.
Outstanding Demand
Like other AI-focused semiconductor manufacturers, AMD is seeing a massive increase in demand.
Speaking in Taipei this week, CEO Lisa Su warned that demand is running far ahead of global supply chain capacity. Supply bottlenecks are affecting silicon fabrication, advanced logic wafers, high bandwidth memory and other facets of Advanced Micro’s business.
Because of this supply crunch, Advanced Micro Devices has expanded its supply chain planning time horizon to a three-to-five year time frame.
We’re expecting more details, and additional forward guidance, when Advanced Micro Devices reports earnings after the close on November 3.
Valuation Concerns
Advanced Micro Devices currently trades with a 12-month trailing price-earnings ratio of 156. The company trades at about 40-times forward earnings.
However, AMD currently has a price earnings ratio over expected earnings growth rate (PEG) of 0.63. Any stock with a PEG ratio below 1 is considered potentially undervalued.
So, while expectations remain high, it can be argued that those expectations are justified by Advanced Micro’s anticipated future growth.
Bottom Line
Advanced Micro Devices is one of the strongest stocks in the AI-focused semiconductor manufacturing sector. That sector is leading the way once again, as both AMD and Nvidia ($NVDA) recently reached fresh all-time highs. Renewed strength in this sector propelled the S&P 500 and the Nasdaq Composite to all-time highs earlier this week.
At the time of publication, Ponsi was long AMD and NVDA.
