Advanced Micro Devices Faces Stock Challenges: What Investors Should Know
Advanced Micro Devices (AMD) has become a hot topic for many investors lately, prompting careful consideration of its financial outlook. Let’s delve into the key facts likely to impact its stock performance in the near future.
Over the past month, AMD’s shares experienced a decline of -17%, in contrast to a modest gain of +0.4% for the Zacks S&P 500 composite. Additionally, the Zacks Computer – Integrated Systems industry, where Advanced Micro operates, saw a loss of 5.6%. Investors may wonder: What direction is the stock heading?
Media coverage and rumors often drive immediate stock changes. However, long-term decisions typically hinge on fundamental factors that affect a company’s earnings potential.
Reviewing Earnings Estimates
At Zacks, we place a premium on the changes in earnings projections. The present value of a company’s earnings often dictates its stock’s fair market price. An upward revision of earnings estimates can suggest a rise in a stock’s fair value, attracting buyers and boosting its price. Historical trends show a strong relationship between earnings estimate changes and short-term stock price movements.
For the current quarter, Advanced Micro is projected to earn $1.06 per share, reflecting a significant increase of +37.7% compared to the same quarter last year. Over the last 30 days, the Zacks Consensus Estimate for this quarter has decreased by -6.2%.
The consensus estimate for the entire fiscal year stands at $3.30, indicating a year-over-year growth of +24.5%, though this figure has seen a slight downturn of -1.2% recently.
Looking ahead, the forecast for the next fiscal year suggests earnings of $4.91 per share, which translates to a remarkable increase of +48.6% from expectations a year prior. This estimate also declined by -5.5% in the past month.
Utilizing a robust proprietary rating system known as the Zacks Rank, we assess stocks based on earnings revision trends along with other key factors. Currently, AMD holds a Zacks Rank #3 (Hold), indicating a neutral outlook.
See the chart below for the progression of the company’s 12-month consensus EPS estimate:
12 Month EPS
Revenue Growth Outlook
While earnings growth is often considered the best indicator of a company’s financial strength, consistent revenue growth remains essential. Long-term earnings growth is challenging without corresponding revenue increases.
For the current quarter, the consensus estimate for Advanced Micro’s revenues sits at $7.51 billion, showing an increase of +21.8% year-over-year. Projections for the current and next fiscal years suggest revenues of $25.66 billion and $32.33 billion, reflecting growth rates of +13.2% and +26%, respectively.
Latest Results and Performance Trends
In its last report, Advanced Micro posted revenues of $6.82 billion, representing a year-over-year rise of +17.6%. The earnings per share (EPS) reported was $0.92, up from $0.70 the previous year.
When compared to the Zacks Consensus Estimate of $6.71 billion, AMD’s reported revenues showed a positive surprise of +1.59%. The EPS surprise was +1.1%.
In the past four quarters, the company exceeded consensus EPS estimates three times and surpassed revenue estimates in each instance.
Assessing Valuation
Considering a stock’s valuation is vital for informed investment decisions. Analyzing whether a stock’s price reflects its intrinsic value and growth potential helps predict future performance.
Using various valuation metrics—like price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF)—enables investors to determine if a stock is fairly valued, overvalued, or undervalued. Comparisons to both historical values and peer companies further clarify a stock’s price position.
According to the Zacks Value Style Score, which evaluates stocks on traditional and unique valuation metrics, Advanced Micro received a grade of D. This suggests the company is trading at a premium compared to its peers. Click here to explore the valuation metrics behind this score.
Conclusion
The insights provided here, along with additional information from Zacks.com, can help investors decide how much attention to devote to the ongoing discussions surrounding Advanced Micro. Currently, with a Zacks Rank #3, the company is expected to perform in line with the broader market trends.
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Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
