Why Advanced Micro Devices Stock Dropped This Week
What happened
Week to date, shares of Advanced Micro Devices (NASDAQ: AMD) are down 16.5% as of 10:38 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence.
One analyst issued a bullish forecast for AMD on Thursday, but that was overshadowed by a disappointing earnings report from Micron Technology that weighed on semiconductor stocks toward the end of the week.
So what
Micron is a leading supplier of memory and storage chips and announced a record quarter. However, the company said it would pull back on expanding capacity to account for the declining demand trends in the consumer PC market.
AMD has been doing well in the enterprise market, taking market share away from Intel in server chips. But investors are selling ahead of the expectation that the economy is heading into a recession. However, this is sending AMD stock down to a bargain valuation relative to its long-term growth opportunities.
Now what
In its last earnings report, issued in May, AMD said it expects full-year revenue to grow approximately 60% year over year. This is partly driven by the additional revenue from the Xilinx acquisition completed in the first quarter, which positions AMD for growth in new markets, such as connected devices, artificial intelligence applications, and robotics.
Analyst Gus Richard at Northland Capital Markets issued a positive note on AMD on Thursday, noting that the company is well positioned to have a relatively good year in 2023 due to its competitive position in the server market.
Fears of slowing growth in the near term give investors a great buying opportunity. AMD shares now trade at an attractive valuation of 16.7 times this year's earnings estimates. This is a big discount compared to the level the shares were at a year ago, when investors were thinking about the company's long-term prospects instead of worrying about the near-term economic trends.
10 stocks we like better than Advanced Micro Devices
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Advanced Micro Devices wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 2, 2022
John Ballard has positions in Micron Technology. The Motley Fool has positions in and recommends Advanced Micro Devices and Intel. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.
