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Buy Chip Stock AMD Before Q2 Earnings and Stay for Big Growth?

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Advanced Micro Devices (AMD - Free Report) stock has been on a wild ride in the last 48 hours. So let’s see if investors should consider buying the semiconductor stock ahead of AMD’s upcoming second quarter earnings release on Tuesday, July 28.

What’s Going On?

AMD’s processors are used within the PC market. Yet it owes some of its stellar five-year stretch to its expansion beyond the more mature PC market into gaming and data centers. The firm’s GPUs now compete against the likes of Nvidia (NVDA - Free Report) and its CPUs challenge Intel (INTC - Free Report) .

On Wednesday, AMD stock soared after it announced its Ryzen 4000 Series Desktop Processors. The firm’s new 7nm x86 desktop processors with built-in graphics are made for both the consumer and commercial PC markets.

Wall Street clearly seemed pleased with the move since this could help AMD expand its PC market share. Shares of AMD jumped over 7% on Wednesday, and climbed after-hours Thursday after they slipped alongside the broader tech industry during regular trading.

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Fundamentals

AMD boasts Apple (AAPL - Free Report) as a customer, and it works with cloud powers Microsoft (MSFT - Free Report) , Google (GOOGL - Free Report) , and IBM (IBM - Free Report) . And CEO Lisa Su said on her firm’s Q1 earnings call that AMD expects to benefit from the holiday 2020 launches of the and next-generation Xbox and PlayStation.

Investors should note that AMD’s sales jumped 50% in Q4 and 40% in the first quarter. Last quarter’s growth was driven by its 7-nanometer Ryzen, Radeon, and EPYC processors. On top of that, AMD recorded its best gross margin in eight years, up 5% from the year-ago period to 46%.

As we alluded to, AMD stock has skyrocketed from under $2 a share to $60 during the past five years. This puts it well above fellow high-flyers such as Applied Materials (AMAT - Free Report) , Micron (MU - Free Report) , and Nvidia. The stock also just broke out of a three-month slump that saw it move sideways to hit brand new highs Wednesday.

Despite the climb, AMD trades in line with its industry and at a significant discount to NVDA at 7.8X forward 12-month sales vs. 16.4X.

Outlook

AMD’s second quarter revenue is projected to jump 21% to $1.85 billion, with its full-year sales expected to surge 25%, based on our current Zacks estimates. This would top FY19’s 4% jump and come in above FY18’s 23% and FY17’s 22%. AMD is then expected to follow up this growth with another 19.3% growth next year.

Better still, AMD’s adjusted Q2 earnings are projected to skyrocket 100% to $0.16 per share. Peeking further ahead, the company’s full-year earnings are expected to climb 58% this year and another 47% in 2021   

Bottom Line

AMD is a Zacks Rank #2 (Strong Buy) heading into earnings. That said, investors might use the next several weeks as a chance to take home profits. And the stock just ripped into new territory.

Nonetheless, longer-term investors don’t need to time things so precisely. Let’s also not forget that AMD is expected to post major growth during uncertain times, and its other fundamentals make it rather attractive.

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