Target This Chip Stock Ahead Of The Fed Meeting

AMD has a history of outperformance following Fed meetings and rate hikes

Managing Editor
Sep 20, 2018 at 11:43 AM
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Advanced Micro Devices, Inc. (NASDAQ:AMD) is down 0.7% to trade at $31 today, despite a price-target hike from Stifel to $38 from $21. The analyst in coverage believes the chip delays from sector rival Intel (INTC) "opens the door for continued market share gains by AMD." Stifel's new target, a 22.6% premium to its current perch, is the second bull note the chip stock has received this week.

In addition to the bull notes, AMD is flashing two intriguing bullish signals ahead of the Fed meeting next week. According to Schaeffer's Senior Quantitative Analyst Rocky White, the chipmaker is one of the best stocks to own after a Fed meeting, gaining an average of 2.25% the week after, looking at one-week performances following the past 29 Fed meetings. The equity was higher one week later 69% of the time. 

It gets better: a third interest rate hike of 2018 is widely expected at the two-day policy meeting next week. Looking at one-week performances after the past seven rate increases from the central bank, AMD has been the number two stock to own a week after a Fed rate hike. More specifically, the shares have averaged a one-week return of 5.25%, with 86% of the returns positive.

On the charts, the stock remains a chip-shot from its Sept. 13 12-year peak of $34.14, while today's positive price action has AMD on track to snap a three-day losing streak. Despite this mini-pullback, the shares have been guided higher by their 10-day moving average since late July. And let's not forget, the red-hot chip stock has more than tripled off its April lows near $9.
 
Daily Stock Chart AMD

 

Despite the recent string of bull notes, many analysts remain on the sidelines. Of the 20 brokerages covering AMD, nine rate it a "hold" or "strong sell." Further, the security's average 12-month price target of $23.98 is a 23% premium to its current perch.

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