Wall Street’s Average Price Target for AMD Implies Only 9% Upside. Is the Stock a Buy, Sell, or Hold?
Yes — by the numbers, Wall Street is treating Advanced Micro Devices (AMD -5.09%) as close to fully valued going into next week’s report. The average price target on the stock is $570.60, about 9% above Friday’s close of $521.95.
That cushion is thin for a stock this well-liked. Of the 51 analysts covering AMD, 41 rate it a buy, 10 rate it a hold, and none rate it a sell. Nearly everyone recommends the stock. Almost nobody’s math leaves room for much upside.
Additionally, published targets stretch from $320 to $1,250, so there’s no shortage of disagreement about where the chipmaker is headed. But the average lands close to where the stock already trades.
Image source: AMD.
The stock’s valuation multiple explains the caution. At about $522, AMD trades at about 170 times earnings and about 59 times forward earnings estimates, with a market capitalization of about $851 billion. The trailing figure reflects where the profits were over the past year. The forward one assumes the growth keeps coming.
Still, the stock sits only about 11% below its 52-week high of $584.73, so this isn’t a name the market has given up on.
What earns a price like that is the data center business, and so far it has delivered. Data center revenue rose 57% year over year to $5.8 billion in the first quarter, driven by demand for the company’s EPYC server processors and its Instinct line of artificial intelligence (AI) accelerators.
Management guided for total second-quarter revenue of about $11.2 billion, implying roughly 46% year-over-year growth, an acceleration from the first quarter’s 38%. And non-GAAP (adjusted) earnings per share rose 43% last quarter.
Today’s Change
(-5.09%) $-26.57
Current Price
$495.38
Key Data Points
Market Cap
Day’s Range
$476.92 – $528.00
52wk Range
$149.22 – $584.73
Volume
1.1M
Avg Vol
33.6M
Gross Margin
47.09%
The report lands Tuesday, Aug. 4, after the market closes, with the earnings call at 5 p.m. ET. To keep a 59-times-forward multiple working, data center growth likely has to keep accelerating, and earnings have to keep compounding at something like last quarter’s pace for years, not quarters. That is a high bar for any company, even one executing this well.
For investors, a valuation like this implies patience. A report strong enough to push analysts’ numbers higher could change the math quickly. But any stumble at this multiple could send the shares sharply lower.
That doesn’t make the stock a sell — zero analysts call it one. It does mean the price assumes the Aug. 4 report goes right. By Wall Street’s own numbers, AMD is already trading about where it belongs.
