Why AMD May Be Worth Its Expensive Valuation

Barclays just lifted its price target to $148

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On Jan. 4, Advanced Micro Devices, Inc. (NASDAQ:AMD) announced the launch of new products during the 2022 Product Premiere livestream. During the livestream, President and CEO Dr. Lisa Su highlighted over 30 new AMD products. Meanwhile, Advanced Micro Devices has earnings due out later this month on Monday, Jan. 24. Analysts expect that AMD's earnings will come in at $0.76 per share.

The stock was last seen up 1.9% at $139.85, thanks to a price-target hike from Barclays to $148 from $135. Should more analysts follow Barclays' lead, it could put additional wind at the stock's back, especially considering AMD's 12-month consensus price target of $143.21 is a slim 2.8% premium to last night's close. Plus, nine of the 24 in coverage still consider it a "hold," compared to 15 "buy" or better ratings. 

Advanced Micro Devices stock has turned somewhat volatile since its Nov. 30 record high of $164.45, with a rally running out of steam near the $155 level -- home to the stock's former early November peak. Its most recent pullback found footing at the 80-day moving average, which served as a floor in late-September. Year-over-year, AMD is up over 41%. 

amd jan 12

From a fundamental point of view, AMD offers a very rich valuation, with a price-earnings ratio of 42.63 and a price-sales ratio of 11.42. However, the company has seen incredible top- and bottom-line growth in recent years, growing revenues by 129%, and net income by more than 1077% since fiscal 2018. AMD's trailing 12-month revenues and net income are also up 52% and 59%, respectively, since fiscal 2020.

In addition, the semiconductor company holds a great balance sheet with $3.61 billion in cash and $702 million in total debt. Overall, AMD’s fundamentals suggest that the stock continues to offer strong long-term opportunity despite its current high valuation.

 




 
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