RBC Thinks This Chip Stock's Rally Could Have Legs

AMD has already added 147% for the year

Deputy Editor
Dec 24, 2019 at 9:34 AM
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A bull note from RBC helped lift the shares of semiconductor name Advanced Micro Devices, Inc. (NASDAQ:AMD) this morning. The stock is up 1.3%, now trading at a 12-year high of $46.06, after the analyst raised its price target to a Street high of $53 from $50. The broker also hiked it full-year forecast in order to reflect strengthening data center demand and its estimated margin increase in 2020. 

Anyone watching AMD this year can clearly see its near breakneck run up the charts, with two notable pullbacks neatly contained by the 200-day and the 30-day moving averages, respectively. Now the shares are eyeing their fourth consecutive win. For the year, Advanced Micro Devices has tacked on over 147%. 

More equity-boosting upgrades could be on their way, too. Right now, the consensus 12-month price target of $37.77 is at a roughly 18% discount to last night's close. Plus, 14 of the 21 in coverage still consider AMD a "hold."

The options pits tell a different story, though. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMD sports a 10-day call/put volume ratio of 2.34, which sits higher than 65% of readings from the past year. Echoing this, short-term options traders have rarely been more bullish, per the security's Schaeffer's open interest ratio (SOIR) of 0.92, which sits in the 4th percentile of its annual range. 

Plus, for those looking to speculate on AMD's next move, options are incredibly cheap right now. The stock's Schaeffer's Volatility Index (SVI) of 38% sits in the extremely low 3rd percentile of its annual range. This means options traders are pricing in relatively low volatility expectations. 

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