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Is Now the Time to Buy Advanced Micro Devices (AMD) Stock?

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Shares of Advanced Micro Devices (AMD - Free Report) are once again soaring on Wednesday, marking the third straight day of gains and officially sending the stock back above its pre-selloff levels. The volatility in the tech sector clearly didn’t last long, and trendy chipmakers like AMD have quickly returned to the spotlight.

And while AMD shares climbed above $13.50 in Wednesday morning trading, the stock is still about 15% lower than its 52-week high. Indeed, it was been a wild ride for AMD so far this year, and investors have been reluctant to establish a new range for the stock over the past few months.

But what’s next for 2017’s craziest rollercoaster? Can AMD break higher soon, or is another dip in its future? Let’s take a closer look.

Overall, AMD has VGM grade of “D,” which typically implies that its fundamental picture is relatively weak. However, it’s important to highlight its growth metrics, because the company is truly experiencing a year of aggressive EPS growth. If our current consensus estimates hold up, they would reflect EPS growth of 87.5% this fiscal year, and that’s on the back of projected sales growth of nearly 12%.

We should also mention that AMD’s grade of “F” for Value is certainly dragging down its overall VGM grade. Of course, the fact that the company is not currently turning a profit harms several of its key value-focused metrics and makes the stock relatively unattractive for value-focused investors. However, the P/S ratio is often preferred for these loss-making tech companies, and a P/S of 2.5 compares well to AMD’s industry and the overall market.

It’s also important to recognize that, although shares have skyrocketed over the past year, the stock is only up about 6% year-to-date, which means we’ve really started to see this once-scorching hot pick cool off a bit. To momentum-focused investors, that might mean we’ve already missed our opportunity to ride the stock to new highs. However, others would consider the room between its current level and the top of its 52-week range an attractive buying opportunity.

We also have to look at the recent trends that are influencing this fundamental picture. AMD is coming off the relatively well-received launch of its new Ryzen processors, and the company’s products are continuing to gain ground on comparable offerings from rivals Intel (INTC - Free Report) and Nvidia (NVDA - Free Report) . The latest exciting new product from AMD is Epyc, a data center chip that is already being considered a solid alternative to existing market leaders.

Also, a lot has been made about a growing demand for graphics chips from cryptocurrency miners. As prices of bitcoin and ethereum have soared over the past year, more and more “miners” are relying on the extreme power of graphics chips, and that’s good news for AMD (also read: Advanced Micro Devices Gains 6% as Cryptocurrency Demand Grows).

Of course, AMD is also a Zacks Rank #3 (Hold). Remember, the Zacks Rank is heavily influenced by earnings estimate revisions, so let’s check out a quick snapshot of the revision activity we have seen for AMD recently:

This is an intriguing snapshot because it reflects relatively positive analyst sentiment. We see both strong agreement and rising estimates. For the current quarter, the Zacks Consensus Estimate has moved a penny higher on the back of 86% revision agreement over the last 60 days. That type of move isn’t much to write home about, but it is encouraging nonetheless.

Furthermore, we can see that the Zacks Consensus Estimate for AMD’s next fiscal year has soared recently. While the Zacks Rank is a 1-3 month indicator, it is nice to see this positive sentiment about the company’s future, because it proves the thesis that AMD is an exciting growth pick for the next few years.

Finally, let’s take a look at couple of six-month charts for AMD to see if we can spot an interesting trends:

In short, this is a bit of a messy picture. As the price chart shows, AMD has seen very little support or resistance from its moving averages, and share prices seem to be very susceptible to short, drastic swings. These hikes and dips can be blamed on both earnings results and daily news, and they make drawing out any trend-lines difficult.

We also see some wild swings on the stock’s Williams%R chart, which is typically used to indicate “overbought” and “oversold” levels. The -50 threshold is the important one to note here, because a move above this line from “oversold” territory is typically considered a bullish signal (and vice versa).

As the chart shows, the stock has been prone to several bullish and bearish moves into both of these territories. One thing we might be able to draw from this picture is that the stock doesn’t seem to stay in either of the extreme territories for too long, and it is currently lingering in “overbought” territory after the last few trading days.

Regardless, everyone will interpret these technical charts differently, and traders tend to have their own individual strategies. In the case of AMD, there doesn’t seem to be much to indicate that its day-to-day volatility will disappear anytime soon. However, the company looks to have an exciting future, which should be encouraging for buy-and-hold investors.

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