Is Trending Stock Advanced Micro Devices, Inc. (AMD) a buy it now?

Advanced micro-systems (AMD) is one of the most viewed stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.

Over the past month, shares of this chipmaker have returned -16.5%, compared to the -4.3% change in the Zacks S&P 500 composite. During this period, the industry Zacks Electronics – Semiconductors, which includes Advanced Micro, lost 9.3%. The key question now is: what could be the future direction of the title?

Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.

Revisions to earnings estimates

Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.

We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Advanced Micro is expected to post earnings of $1.03 per share, indicating a +63.5% change from the prior year quarter. The Zacks consensus estimate has changed by +0.8% over the past 30 days.

The current year earnings consensus estimate of $4.37 indicates a year-over-year change of +56.6%. This estimate has changed by +0.8% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $4.98 indicates a change of +13.8% from what Advanced Micro is expected to report a year ago. Over the past month, the estimate has changed by +0.7%.

With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, resulted in a Zacks No. 3 (holding) ranking for Advanced Micro.

The chart below shows the evolution of the company’s consensus 12-month EPS estimate:

12 month EPS

Revenue Growth Forecasts

Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a company.

For Advanced Micro, the current quarter sales consensus estimate of $6.52 billion indicates a year-over-year change of +69.3%. For the current and future fiscal years, the estimates of $26.36 billion and $30.02 billion indicate variations of +60.4% and +13.9%, respectively.

Latest reported results and history of surprises

Advanced Micro reported revenue of $5.89 billion in the last quarter, representing a year-over-year change of +70.9%. EPS of $1.13 for the same period versus $0.52 a year ago.

Compared to the Zacks consensus estimate of $5 billion, reported revenue is a surprise +17.73%. Surprise EPS was +24.18%.

The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus earnings estimates every time during this period.

Evaluation

Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.

While comparing the current values ​​of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values ​​help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of ​​the reasonableness of the stock price .

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to traditional and unconventional valuation metrics to rank stocks from A to F (an A is better than a B; a B is better than a C; and so on), is quite useful in determining whether a stock is overvalued, correctly priced, or temporarily undervalued.

Advanced Micro is rated C on this front, indicating that it trades at par with its peers. Click here to see values ​​for some of the rating metrics that led to this rating.

Conclusion

The facts discussed here and plenty of other information on Zacks.com might help determine whether or not it’s worth paying attention to the market buzz about Advanced Micro. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.

7 best stocks for the next 30 days

Just Released: Experts distill 7 elite stocks from the current Zacks No. 1 Ranking 220 Strong Buys list. They consider these tickers “most likely for early price increases.”

Since 1988, the full list has beaten the market more than 2 times with an average gain of +25.4% per year. So be sure to give your immediate attention to these 7 handpicked ones.

Discover them now >>

Click to get this free report

Advanced Micro Devices, Inc. (AMD): Free Inventory Analysis Report

To read this article on Zacks.com, click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Comments are closed.