The 14.92% weekly decline in shares of Advanced Micro Devices (NASDAQ: AMD) could lead to a dangerous follow-through in negative momentum. With the last quarterly earnings report still fresh in the minds of investors, AMD is falling with the markets. The positive correlation could widen the paper loss for shareholders who believe in AMD’s long-term growth potential. In the near-term, how likely will AMD stock fall to $15 a share?
AMD trades at a forward P/E of 27 times while its revenue is expected to keep growing in the 25 -30% range. Yet at this valuation, Nvidia Corporation (NASDAQ: NVDA), at a $130 share price, is valued at just an 18 times forward P/E. If Nvidia offers better value as a pure-play GPU supplier, then investors are better off holding Nvidia over AMD. But if markets continue to fall with a few trading days left in 2018, AMD could end the week at $15 a share.
This would bring the stock back to the pre-rally breakout that started this past July. AMD had one bad quarter and forecasts short-term weakness in its GPU business. Blaming the cryptocurrency suggests that the headwind in this segment of the market will continue in 2019.
When gaming stocks like Electronic Arts (NASDAQ:EA), Activision (NASDAQ:ATVI), and Take-Two (NASDAQ:TTWO) are all off as much as 49%, there is no real rush to buy AMD stock. Wait for market sentiment to sustain a neutral position, then look at AMD again.
