Breaking News
0
有香港版
您更倾向于浏览Investing.com的中文版吗?

Is AMD Stock A Buy After Its 20% Plunge?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsFeb 27, 2020 12:33PM ET
www.thechinesenews.net/analysis/is-amd-stock-a-buy-after-its-20-plunge-200511229
Is AMD Stock A Buy After Its 20% Plunge?
By Investing.com (Haris Anwar/Investing.com)   |  Feb 27, 2020 12:33PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Suddenly, it’s a totally different world for the high-flying semiconductor stocks. In just a week, the bull case for these chip producers has weakened significantly as the global economy comes under pressure from the effects of the coronavirus outbreak.

After rallying strongly over the past year, these chipmakers took a hard beating this week as investors rushed to offload their risky assets on concerns about the potential impact of the illness on global economic growth.

The Philadelphia Semiconductor Index, which includes some of the world’s largest chipmakers, has shed more than 11% in the past five trading days in a widespread sell-off.

While analysts and economists are still struggling to understand the extent of damage to the global economy from this fast spreading deadly virus, investors should be ready to see a steep correction in this segment of the market, where investors have very strong, built-in expectations.

In this uncertain situation, it’s also important to recognize which chip stocks are more exposed to this spell of weakness. Advanced Micro Devices (NASDAQ:AMD), the top performer of 2019, is at the head of this list, in our view.

AMD Weekly Price Chart
AMD Weekly Price Chart

After returning about 150%, AMD's shares were the biggest percentage gainer among the stocks listed in the S&P 500 index last year. But now, having plunged close to 20% from the record high of $59.27 reached on Feb. 19, the stock is already in a bear market.

Even before it was hit by the coronavirus-triggered sell-off, AMD was showing some signs of peaking. Last month, the Santa Clara, California-based company gave a lackluster forecast for the current quarter that disappointed investors.

Revenue in the first three months of the year will be about $1.80 billion, plus or minus $50 million, the company said, falling short of the average analyst estimate of $1.87 billion, according to data compiled by Bloomberg.

Very Rich Valuation

Another reason AMD is more susceptible to a sustained weakness in equity markets is the company’s premium valuation. At 30 times forward earnings, AMD is among the most richly valued chip stocks, fetching more than twice the semiconductor group’s average multiple.

Michael Binger, president of Gradient Investments, told CNBC last week that AMD stock was “very rich” and the company’s exposure to the PC market makes it vulnerable. Microsoft (NASDAQ:MSFT) yesterday cut its quarterly outlook, citing the coronavirus epidemic, which is slowing production of computers and crimping sales of an array of consumer services and electronics.

In a statement , the company said it doesn’t expect to meet earlier guidance for fiscal third-quarter revenue in the Windows personal-computer software and Surface device business because the supply chain is returning to normal at a slower pace than expected. That warning from the world’s largest software company is enough to show that things could get quite ugly for hardware companies as well.

AMD has benefited from persistently strong demand for personal computers as companies upgraded to a new version of Microsoft Windows operating system. AMD is the second-largest maker of chips used in computer graphics cards.

To get its growth cycle going, AMD released a large array of new products last year, targeting its biggest rival Intel (NASDAQ:INTC), which is struggling to roll out its latest and most advanced chips.

In a series of new product releases, the company showed that it is in a position to gain a competitive edge over Intel and could win the biggest customers in the cloud computing market — who previously had little option but to rely on Intel’s expensive products.

“Intel has a lot of clout still in this market and they can stay price cutting. They can bring better products to market, that’s what I worry about the most. … Would I buy it here today? No, I wouldn’t, and I’d wait for that pullback.” Binger told the network.

Bottom Line

As we had warned in our Jan. 9 article, AMD stock was susceptible to some correction after reaching the highest level nearly in two decades. Now that this pullback is underway, investors shouldn’t rush to buy the stock yet.

But, once the dust is settled, AMD will be a good pick for long-term investors as the chipmaker slowly expands its market share. In addition, it's well positioned to take advantage of lapses by Intel.

Is AMD Stock A Buy After Its 20% Plunge?
 
Is AMD Stock A Buy After Its 20% Plunge?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Puttarac Chackri
Puttarac Chackri Mar 03, 2020 5:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
personally, I would not buy this stock until late Spring or early Summer. it's not because of the fundamental or anything like that. it's about the cyclical.
Darren Hunt
Darren Hunt Feb 29, 2020 11:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
wait till virus had it's way with the market then buy . maybe a month from now
Thanos theBear
Thanos theBear Feb 28, 2020 8:26PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bought it at 11! Time to go back in. Haris is like the best investor writer ever!
Raul Davila
Raul Davila Feb 28, 2020 2:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
going to 30's
Solomon Cutler
Solomon Cutler Feb 27, 2020 9:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for that unbiased outlook. Agreed.
Ali Budak
Keldede Feb 27, 2020 2:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks
Mark Ukanela
Mark Ukanela Feb 27, 2020 1:47PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I would pick it up around 30
simon mutuku
simon mutuku Feb 27, 2020 4:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hello Haris, which brokers do you recommend for an investor outside the USA for stocks and shares
Four Blue
Four Blue Feb 27, 2020 4:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Move to the USA. Thatll solve your problem
Tamás Tóth
Tamás Tóth Feb 27, 2020 4:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
degiro
Marek Klučka
Marek Klučka Feb 27, 2020 4:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tamás Tóth DeGiro. I agree. great broker
Yamilka Lopez
Yamilka Lopez Feb 27, 2020 4:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
td ameritrade
Yousef Dewan
Yousef Dewan Feb 27, 2020 3:03AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I bought small amounts and I will keep buying everytime it drops more
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email
We have a special offer for you