Advanced Micro Devices (NASDAQ: AMD) jumped as much as 20% Wednesday, the stock’s best day in two years, after forecasting “high single-digit percentage revenue growth” for 2019, “driven by Ryzen, Epyc and Radeon data-center GPU product sales as the company ramps 7nm products throughout the year.” Analysts’ had predicted revenue growth for the year to come in around 6%.
“As we go into Q2 and beyond, we see a significant opportunity with the ramp of our new products, and that’s how we see the year,” said AMD Chief Executive Lisa Su on a call with analysts on Tuesday.
The chip maker’s outlook for this year shows that it is “hitting its product cycle stride,” according to Jeffries, while JPMorgan’s (NYSE: JPM) Harlan Sur says that it shows that AMD is “executing well on its product roadmap and making progress toward its 2020 financial model” as the company is winning “market share gains, solid top-line growth and margin expansion.”
Bernstein analyst Stacy Rasgon said that the full-year outlook is “extremely optimistic” in a note to clients on Wednesday. “With the company looking for a sizable 2H rebound and solid high single digit YoY growth,” that gives “something for the bulls to easily grasp onto, coupled with clear evidence that the new core businesses are indeed ramping well,” she said.
However, “there is fodder for the bears as well, as the controversy will now undoubtedly hinge upon the achievability of that full-year guide, which requires a back-half ramp that would make Even Knievel nervous,” Rasgon said.
Analyst Matthew Ramsay at Cowen bumped his price target for the stock to $28 from $26—nearly 17% higher than Thursday’s closing price—despite there being “a lot to prove to hit the 2H19 implied guidance.”
Still, “management’s full year outlook for high-single-digits growth demonstrates confidence in 7nm product share gains, with the FY19 outlook implying >50% Y/Y growth in 2H19 over 1H19,” Ramsay said.
AMD shares are already up 32% so far this year, and have gained 17% in the last week alone. But I expect shares to continue to climb.
Technically speaking, there’s an opportunity here. So far this year, the stock has been trading in a tight range between $19 and $23, following last year where the stock traded in a huge range.
Whenever there’s a tightly defined range, like the one we’ve seen with AMD so far this year, any breach of that range—either up or down—typically carries more momentum in that direction. Thus, a break out of the range could propel the stock higher.
On Wednesday, the stock closed at $23. Then Thursday, shares jumped as high as $25 and ended the day at $24 – a breakout that could trigger a buy signal and encourage more buyers to jump in.
With that, if you’re already long AMD, now may be a good time to add to your position. While if you’re starting a new position, jump in now but leave some room to add later on.
“While some investors may be hesitant due to well-documented macro uncertainty, we are confident in materially improved financials starting in mid-2019 and a sustainably stronger product roadmap,” Ramsay said. Ramsay also noted that AMD shares remain a top pick for this year.