Advanced Micro Devices (AMD) Closing In on $100

Advanced Micro Devices, Inc. (AMD) inventory is closing in on the triple digits for the primary time in its 49-year public historical past after posting a superb 100% return in 2020. Monday’s look on the Consumer Electronics Show (CES 2021) marked the newest optimistic catalyst, proper on the heels of a report that activist investor Dan Loeb is urgent Dow part and rival Intel Corporation (INTC) to pursue “strategic alternatives.”

AMD and NVIDIA Corporation (NVDA) have benefited vastly from mismanagement at Intel, selecting up vital market share on the identical time they’re introducing new generations of chips that can energy artificial intelligence and self-driving autos in coming years. It might take years for old-school tech behemoth Intel to get better from its failure to compete, permitting key opponents to completely dominate extremely worthwhile and quickly rising tech segments.

AMD is about to accumulate Xilinx, Inc. (XLNX) in an all-stock transaction that’s anticipated to shut on the finish of 2021. A secondary offering will probably be wanted to create these shares, suggesting volatility later within the yr. The transaction has generated blended reactions because of the $35 billion price ticket, which some analysts consider is an excessive amount of to pay for the deal. However, traders have voted with their pocketbooks because the October information, lifting shares to new highs.

Wall Street protection on AMD has dried up because the begin of December, with little bullish or bearish commentary and few new price targets. That might change after the Jan. 26 earnings launch, when the corporate is anticipated to report a fourth quarter 2020 revenue of $0.30 per share. Despite speedy share appreciation, that consensus would mark a slight drop in earnings per share (EPS) in comparison with the identical quarter in 2019.

Analyst consensus has dropped to a “Moderate Buy” ranking because the acquisition information, primarily based upon 12 “Buy,” 5 “Hold,” and 1 “Sell” suggestion. Price targets presently vary from a low of simply $13 to a Street-high $120. The inventory is about to open Tuesday’s U.S. session $4 above the median $94.50, suggesting that it is totally valued right now. However, which may be deceptive as a result of the low goal seems to be old-fashioned, maybe from a agency not protecting AMD.

AMD Daily Chart (2018 – 2020)

The uptrend that began in 2016 stalled at $34.14 in October 2018, giving technique to a decline that held main support within the mid-teens. The inventory turned increased in 2019, lastly working its approach again to the prior excessive in June. A November breakout reached $59.27 at the beginning of the pandemic, which triggered a modest selloff that held assist on the 200-day exponential moving average (EMA) in March. The inventory returned to the primary quarter peak in April, lastly breaking out as soon as once more in July.

The rally paused as soon as once more in August, yielding a consolidation comparable in measurement and scope to cost motion within the first half of the yr. This sample has labored off overbought technical readings, elevating the percentages that the rally will mount $100 and maintain on going, posting the following leg of a strong uptrend. More importantly, good points might persist nicely past 2021, particularly if Intel fails to get up from the useless and do what’s wanted to get again on the expansion monitor.

The Bottom Line

AMD inventory is testing December’s all-time excessive and will get away, probably buying and selling nicely above the psychological $100 stage.

Disclosure: The writer held no positions within the aforementioned securities on the time of publication.