New AMD Price Target: Why the Smart Money's on Lisa Su
Here's my read on the charts and my plan for Advanced Micro Devices.
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Some Readers may recall that back on May 7, the morning after Advanced Micro Devices AMD reported first-quarter earnings, that I had written about the name. The shares had gone out that night at $98.62 and I informed subscribers that I was once again long the stock after a lengthy hiatus and was in the building stages of bringing AMD back to a top 10-level allocation among the holdings on my most actively traded portfolio.
My price target at that time was $118 (which has long since been taken out), and I stated my case why AMD was now ranked above Nvidia NVDA in my book. At last night's closing prices, AMD is up 26.2% since I wrote that piece. Remember, that for that quarter, AMD posted top- and bottom-line results that beat Wall Street's expectations. The sales print was good enough for year-over-year growth of 36%. That was a fourth-consecutive quarter of accelerating year over year sales growth.
For the first quarter, data center driven revenue was up 57%, while client-driven revenue was up 68% from the year-ago comparison. Guidance was strong. For the current quarter, AMD expected to generate revenue of $7.4 billion, plus or minus $300 million at that time. That was above the then consensus of $7.24 billion. Adjusted gross margin was seen at 43% inclusive of the roughly $800 million in charges the company had expected to take for inventories and other costs related to the nation's high-tech export rules regarding China. Excluding those charges, adjusted gross margin was seen at something more like 54%.
Recent News
Last Thursday, AMD presented a case for focusing on artificial intelligence "inferencing." CEO Lisa SU said that inferencing demand is now outpacing training demand. Inferencing is the term used for when in-the-moment data is run through an AI model that's predicting something or solving a task.
"Training is always going to be the foundation for developing models, but the demand for inferencing has grown tremendously, driven by more capable models and increasing use cases," said Su.
Su was quite optimistic, and added, "We are also seeing an explosion of models, especially models for specific uses such as coding, healthcare and finance. Over the next few years, we expect hundreds of thousands, and eventually millions of purpose-built models each tuned for specific tasks, industries or use cases. It drives significantly more compute, which is good for us. Agents are also adding increasing demand for GPUs. It is the equivalent of adding millions of users to the global compute infrastructure."
Analysts...
Morgan Stanley's Joseph Moore, who is rated at five stars out of five by TipRanks and is considered across Wall Street to be something of a tough grader, did not change his "hold" rating. But Moore did write “AMD launched the MI350 as expected, but the focus remains on the rack scale MI400/450 product for next year which could provide the bigger inflection – if they can deliver.”
On Friday, five-star rated Gary Mobley of Loop Capital, reiterated his "buy" rating and $140 price target price on AMD, followed by Harsh Kumar's action on Monday. Kumar of Piper Sandler — also rated at five stars — reiterated his "buy" rating on the shares, while increasing his price target from $125 to $140.
Lisa Su Has Been Busy
- May 20: AMD announced the sale of data center infrastructure company ZT Systems but retained the ZT engineering team.
- May 28: AMD announced the acquisition of photonics company Ensami.
- June 4: AMD announced the acquisition of open-source software company Brium.
- June 6: AMD announced the hiring of the AI hardware and software engineering teams away from AN inference processor start-up Untether AI.
The Charts
Back in early May, I showed readers the Falling Wedge pattern of bullish reversal that AMD was trying to break out of:
Needless to say, AMD successfully broke out of that pattern and built a new one:
Now, we see AMD breaking out of an Inverse Head and Shoulders pattern with a neckline the right shoulder at a pivot point of $123. The stock has retaken its 50-day Simple Moving Average and 21-day Exponential Moving Average, which has gotten portfolio managers and swing traders excited about the shares. The stock is currently wrestling with its 200-day Simple Moving Average, which if held, will pack more punch than did the 50-day line. Reactive Strength Is robust, but not yet technically overbought, while the daily Moving Average Convergence Divergence is very close to sending a bullish signal.
My Strategy
Price Target: $147.
Pivot $123.
Add: Down to 21-day EMA.
Panic: Loss of 50-day SMA.
At the time of publication, Guilfoyle was long AMD, NVDA equity.
