Today we're going to take a look at the well-established Advanced Micro Devices, Inc. (NASDAQ:AMD). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$129 at one point, and dropping to the lows of US$101. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Advanced Micro Devices' current trading price of US$102 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Advanced Micro Devices’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Advanced Micro Devices?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17.18% above my intrinsic value, which means if you buy Advanced Micro Devices today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $87.36, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Advanced Micro Devices’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Advanced Micro Devices look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With revenues expected to grow by 52% over the next couple of years, the future seems bright for Advanced Micro Devices. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? AMD’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on AMD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Advanced Micro Devices.
If you are no longer interested in Advanced Micro Devices, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
What are the risks and opportunities for Advanced Micro Devices?
Trading at 1.2% below our estimate of its fair value
Earnings are forecast to grow 53.03% per year
Significant insider selling over the past 3 months
Profit margins (0.9%) are lower than last year (9.7%)
Large one-off items impacting financial results
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.