Advanced Micro Devices Near All-Time High After Historic Breakout

Advanced Micro Devices Inc. (AMD) soared after beating Q2 2020 profit and revenue estimates in July, underpinned by a remarkable 45% year-over-year increase in Computing and Graphics division sales. The smaller Embedded and Semi-Custom division grew 62% during the quarter while Enterprise income fell 4%. The chip manufacturer ended the bullish call by raising Q3 revenue guidance by a wide margin, now expecting to book between $2.45 and $2.65 billion.

Advanced Micro Devices Taking Market Share From Rivals

The company is taking advantage of systemic delays at larger rival Intel Corp. (INTC), expanding a loyal customer base by getting highly-competitive next-generation processors to market at a faster pace. Both central processing unit (CPU) and graphics processing unit (GPU) sales are posting impressive growth, with formerly-loyal NVIDIA Corp. (NVDA) users making the switch. The graphics segment has been growing exponentially since the first quarter.

Cowen analyst Matthew Ramsay raised their AMD target from 90 to 100 last week, noting “We had the opportunity to host AMD CEO Dr. Lisa Su for a series of virtual investor meetings/calls. Messages of road map consistency, execution dependability and much closer collaboration with key customers shone through. With Intel’s road map in flux, but in larger measure due to AMD’s own product innovation, we forecast share gains and strong revenue/margin growth.”

Wall Street And Technical Outlook

Wall Street consensus has eased off extremely bullish levels, with extraordinary share gains lifting Advanced Micro Devices above some valuation targets. It’s currently rated as a ‘Moderate Buy’, based upon 14 ‘Buy’, 11 ‘Hold’, and one ‘Sell’ recommendation. Price targets now range from a low of $50 to a street-high $120 while the stock closed Friday’s session about $3 above the median $81 target. This placement suggests that further upside will be limited without fresh upgrades.

Technically speaking, the stock is extremely overbought after gaining more than 60% so far in the third quarter, raising odds for a multi-week range or deep retracement. The turnaround may have already begun because bear power has increased since the uptrend hit an all-time high at 87.29 more than two weeks ago, forcing weekly relative strength indicators to roll over. Even so, weakening technicals have yet to issue a strong sell signal so an assault on 100 is still possible.