Advanced Micro Devices Stock Performance and Future Prospects

Advanced Micro Devices (AMD) ranks highly on Zacks.com’s list of most searched stocks, prompting investors to evaluate several key factors impacting the stock‘s performance in the coming months.

Over the past month, shares of this chipmaker have seen a return of +7.2%, while the Zacks S&P 500 composite has dropped by -2.8%. In contrast, the Zacks Computer – Integrated Systems industry, which includes Advanced Micro, experienced a decrease of 0.8%. This raises the question: What direction might the stock take in the near future?

Typically, significant changes in a company’s business outlook lead to media attention and immediate price reactions. However, foundational aspects fuel long-term buy-and-hold decisions.

Insights on Earnings Estimate Revisions

At Zacks, we prioritize observing changes in a company’s earnings estimates. We believe a stock’s fair value correlates closely with its anticipated earnings stream.

Our findings primarily rely on how sell-side analysts adjust their earnings projections based on current business trends. When earnings estimates rise, the stock’s fair value increases. Should the fair value exceed the current market price, investor demand often leads to price appreciation. Historical data supports a strong link between revisions in earnings estimates and short-term price dynamics.

For the current quarter, Advanced Micro is forecast to report earnings of $0.93 per share, reflecting a +50% increase from the previous year. The Zacks Consensus Estimate has seen a slight uptick of +0.2% over the last 30 days.

Looking ahead, the consensus earnings estimate of $4.59 for the current fiscal year suggests a change of +38.7% from the last year, remaining stable over the past month. For the next fiscal year, the projected earnings estimate stands at $5.99, indicating a +30.5% increase from expectations a year ago.

With a strong audited track record, the Zacks Rank tool provides a clearer picture of a stock’s price movements in the near term, utilizing insights from earnings revisions. Based on recent consensus estimate shifts and three other earnings-related factors, Advanced Micro holds a Zacks Rank #3 (Hold).

The chart below illustrates the trend of the company’s forward 12-month consensus EPS estimates:

12-Month EPS

Projected Revenue Growth

Understanding revenue growth is critical, as earnings growth alone cannot sustain long-term success. A company must increase revenues to support consistent earnings growth.

For Advanced Micro, the consensus sales estimate for the current quarter is $7.11 billion, suggesting a +30% increase year-over-year. For the current and next fiscal years, the revenue estimates stand at $31.87 billion and $37.68 billion, forecasting changes of +23.6% and +18.2%, respectively.

Recent Results and Surprise History

In its latest quarter, Advanced Micro reported revenues of $7.66 billion, a +24.2% increase from the same quarter last year. The EPS of $1.09 compares favorably to $0.77 from the previous year.

Against the Zacks Consensus Estimate of $7.52 billion, the reported revenues represented a positive surprise of +1.9%, while the EPS surprised by +1.87%. The company has consistently beaten consensus EPS estimates for the past four quarters and has also exceeded consensus revenue estimates in each case during this timeframe.

Valuation Considerations

A sound investment decision involves assessing a stock’s valuation. Analyzing whether a stock’s price adequately reflects its intrinsic value and growth potential is a vital consideration for future price performance.

By examining a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), relative to historical values and peer benchmarks, investors gain clearer insights into whether a stock is overvalued, undervalued, or fairly valued.

According to Zacks Style Scores, Advanced Micro is assigned a grade of D for value, indicating that it is trading at a premium compared to its peers. Click here to see more details on the valuation metrics that influenced this grade.

Conclusion

The insights shared here, along with additional information available on Zacks.com, may help investors gauge whether to pay attention to the current buzz surrounding Advanced Micro. The stock’s Zacks Rank #3 suggests it may trend in line with the broader market in the near term.

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Advanced Micro Devices, Inc. (AMD): Free Stock Analysis report

This article originally published on Zacks Investment Research (zacks.com).

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