In last week’s trading, the spike to nearly $30 ($29.94) in shares of Advanced Micro Devices (NASDAQ: AMD) is as much a concern as more analysts climbing aboard the AMD bullish train. AMD stock topped that high for just a few minutes before backing down quickly. When analysts turned the bearishness on Micron (NASDAQ: MU) stock and Applied Materials (NASDAQ: AMAT), AMD could only close the week up 10%.
After a 40% rally in the month and a YTD return of 166 percent, AMD is long-overdue for profit-taking. Valuations are relatively unfavorable. Micron, whose stock fell 15% last week, trades at a 4.5x P/E and a 3.9x forward P/E, some ten-fold less than that of AMD stock. That Micron is cheap does not automatically suggest the stock will rebound when it reports results on September 20. Even with Micron historically beating estimates by a mile, AMD is relatively unattractive to Micron from a valuation perspective.
AMD’s Ryzen product cycle continues to grow while EPYC will bring in the biggest profit growth Y/Y. But investors should demand more. Vega and Polaris are still behind NVidia’s (NASDAQ: NVDA) GTX 2080-series GPUs. The latter also trades at a forward 34x P/E, which is a discount to AMD stock.
Word of Caution
Per Tipranks, after two upgrades, each with $30 PTs (price targets), the call seems late when the stock is due for profit-taking. Whatever happens, AMD’s long-term value is higher.
