Advanced Micro Devices AMD shares are trading at a stretched valuation, as suggested by the Value Score of D. In terms of the 12-month Price/Sales (P/S), AMD is currently trading at 7.19X, a premium compared with the Zacks Computer & Technology sector’s 6.33X and the Zacks Computer-Integrated Systems industry’s 3.27X.
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However, AMD shares have lost 4.1% in the year-to-date period, underperforming the broader sector’s return of 31.8% and the industry’s return of 16.1%.
AMD’s performance has been negatively impacted by weakness in the Embedded segment and intense competition from NVIDIA NVDA.
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Nonetheless, AMD’s portfolio strength is noteworthy, with robust data center demand and meaningful acquisitions. In such a scenario, how should investors approach the AMD stock?
Let’s dig deeper to find out.
AMD expects fourth-quarter 2024 revenues of $7.5 billion (+/-$300 million). At the mid-point of the revenue range, this indicates year-over-year growth of approximately 22% and sequential growth of approximately 10%.
AMD expects Data Center and Client segment revenues to increase significantly year over year, driven by its strong product portfolio. However, the Embedded and the Gaming segment revenues are expected to decline.
The Zacks Consensus Estimate for AMD’s fourth-quarter 2024 earnings is currently pegged at $1.07 per share, up by a penny over the past 30 days. The figure suggests 38.96% year-over-year growth.
The consensus mark for fourth-quarter 2024 revenues is pegged at $7.51 billion, indicating 21.83% growth year over year.
The Zacks Consensus Estimate for AMD’s 2024 earnings is currently pegged at $3.31 per share, up by a penny over the past 30 days. The figure suggests 24.91% growth from the figure reported in 2023.
The consensus mark for 2024 revenues is pegged at $25.67 billion, indicating 13.20% growth from the figure reported in 2023.
AMD’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, and was in-line in one quarter, the average surprise being 1.86%.
Advanced Micro Devices, Inc. Price and Consensus
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AMD has been benefiting from strong sales of its data center chips that support hyperscalers and power AI and Generative AI (Gen AI) applications. Strong demand for these chips drove global semiconductor sales in 2024.
The Semiconductor Industry Association reported that global semiconductor sales reached its highest-ever monthly total of $56.9 billion in October 2024, indicating 22.1% year-over-year growth.
Per Gartner’s latest report, worldwide semiconductor revenues are expected to grow 19% and reach $630 billion in 2024. In 2025, global semiconductor revenues are projected to grow 14% to $717 billion. GPU revenues are expected to increase 27% in 2025. This bodes well for AMD.
In the third quarter of 2024, AMD saw record data center revenues of $3.5 billion, up 122% year over year and 25% sequentially. It was driven primarily by AMD’s Instinct GPU and EPYC CPU sales.
Meta Platforms META alone employed more than 1.5 million AMD EPYC CPUs globally to power its social media platforms.
AMD is benefiting from a strong partner base and strategic acquisitions. Its acquisitiveness is primarily aimed at reducing the technological gap with NVIDIA in the ongoing race for AI dominance. It has been on an acquisition spree to strengthen its AI ecosystem.
Recent acquisitions include Helsinki-based Silo AI and ZT Systems, which will enhance AMD’s data center AI capabilities, the latter costing approximately $4.9 billion in cash and stock.
AMD’s Enterprise and Cloud AI customer pipeline remains robust, supported by its Instinct platforms. AMD and its partners, including Microsoft, Oracle ORCL, DELL, HPE, Lenovo, and Supermicro, have the instinct platforms in production.
Oracle Cloud Infrastructure has selected AMD’s Instinct MI300X accelerators with AMD ROCm open software to power its latest OCI Compute Supercluster, designed for heavy AI workloads.
New product offerings such as the Instinct MI325X accelerator and the Ryzen AI 300 Series processors are driving growth in the data center and consumer markets, further solidifying AMD’s competitive standing.
AMD has also strengthened its high-performance computing (HPC) portfolio with the El Capitan supercomputer, powered by AMD Instinct MI300A APUs, which has become the fastest on the Top 500 list with a 1.742 exaflop score.
AMD’s expanding portfolio and strategic acquisitions are expected to improve its top-line growth. However, its near-term prospects are dull, given the weakness in the Embedded segment and competition from NVIDIA.
The stock is trading below the 50-day and 200-day moving averages, indicating a bearish trend.
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AMD has a Growth score of D, which makes it unattractive for growth-oriented investors.
AMD currently has a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report