The stock of Advanced Micro Devices, Inc. (Nasdaq: AMD) has been the focus of market interest because of its roughly 70% rise in 2021. In comparison to the S&P 500, which ended the year with gains of about 27%, AMD’s returns were more than double the market standard.
Many people are thinking about buying AMD shares as a result of the recent surge in the stock price, but one question remains: have you missed your window of opportunity? Through 2021, it was evident that Advanced Micro Devices was a top growth stock, but what does the future hold for the company in 2022? Do you think the firm will be able to keep up its impressive growth?
Should You Invest in AMD?
There’s no denying that 2021 was a banner year for AMD shareholders. Major Wall Street firms have taken notice since the stock is held by 270 ETFs, as reported by ETF.com. But what sets this chipmaker apart from the competition? The ticker is a popular tool on Wall Street, but why?
AMD Stock Performance in the Past
Recently, AMD has emerged as a top option. The stock’s price was extremely volatile over the first 30 years of its existence. The stock price was not helped by the company’s severely disjointed business plan. The firm had its toes in too many different pies, and as a result, it was unable to attract investors.
However, positive changes began to take place in 2015. By narrowing its focus to just two products, AMD was able to dominate its market and reap huge financial rewards. The stock price shot up as a result of this news.
In September of 2015, the stock price was $1.74. If you had invested $10,000 then, in January of 2022 you would have more than $795,000.
There have been some ups and downs in the stock price since 2015, but the ups have far outnumbered the downs. For the last five years, investors have seen returns of over 1,200%, which is more than ten times the performance of the S&P 500.
Years of planning have paid off
AMD’s publicly listed stock was volatile for the first 30 years or more due to the company’s disjointed business model. However, the semiconductor firm opted in 2015 to specialize in just two product lines: central processing units (CPUs) and graphics processing units (GPUs) (GPUs).
Because of this shift, the corporation is able to put its whole resources behind a select few staple items and elevate them to market-leading status. As a result, AMD’s stock price has risen dramatically. Specializing in these items and developing the greatest goods in their fields has helped the firm achieve tremendous success across several markets.
If you’re looking for the best GPU for gaming, go no further than AMD. When it comes to video game consoles, AMD’s processors power both the Xbox by Microsoft (Nasdaq: MSFT) and the PlayStation by Sony (NYSE: SONY).
Intel (Nasdaq: INTC) GPUs still dominate desktop PCs, while AMD has cornered the market on game consoles and is making inroads on laptops and desktops.
The Internet’s lifeblood flows through data centers. The Internet, the cloud, and artificial intelligence would not exist without these global networks of servers and computers.
AMD is also quite successful in data centers.
Omida claims that because of the success of AMD’s EPYC chips, the business now has a 16 percent share of the server market. To put it another way, AMD CPUs are powering 16% of the websites you visit right now. A 92% share of a market that is projected to expand to $92 billion in value during the next several years is a significant achievement.
Large corporations are also showing interest in the firm as a potential cloud provider. In order to process the massive amounts of data generated by IBM Cloud services, the business recently revealed that it will be leveraging the company’s CPUs.
The electric car and autonomous vehicle industries are also seeing AMD emerge as a major player. The market leader, Tesla (Nasdaq: TSLA), is now using AMD processors to power the brain in several of its models. The business recently revealed that the Model Y, a car sold in China, will be powered by AMD.
It is anticipated that 2022 will bring much more attention to the metaverse, cryptocurrency, and blockchain. The industry is only afloat thanks in large part to AMD’s high-end processor units.
In December of last year, Facebook’s parent company, Meta Platforms (Nasdaq: FB), announced that it will be switching to AMD processors to power its metaverse operations. High-end AMD CPUs will likely be the foundation upon which many businesses, including Meta Platforms, will construct cutting-edge web services.
Significant Revenue Increase
AMD’s significant revenue growth can be attributed to the company’s dedication on perfecting a small number of key products.
Fortunately, the year 2021 was a fruitful one. Its sales of $11.6 billion in the first three quarters of 2021 was up 78% over the same period in 2020. Gross margins increased, which led to a surge in net income that pushed the total to $2.2 billion, an increase of almost 200 percent.
That’s all the more remarkable since the corporation increased its tax payments by more than a quarter billion dollars during that time.
Analysts’ Opinions on AMD Stock
The consensus among industry experts is largely favorable toward Advanced Micro Devices. Expert consensus places AMD among the best technology companies available today. Of the 25 analysts presently monitoring the stock, 16 give it a Buy recommendation, while the remaining nine give it a Hold recommendation. No sell recommendations are available.
Analysts’ predictions for the stock’s price over the next year range from $115 (the current low aim) to $180 (the high target). An average price of $143.71 has been set, which indicates a possible gain of 4.62 percent.
Considerations Before Purchasing AMD Stock
Taking into account the aforementioned factors, AMD is a stock worthy of your consideration. But it is anticipated that growth would decelerate beginning in 2022. Even yet, a lot of people think the stock will at the very least maintain its value in relation to the market as a whole.
To help you decide whether or not to buy, here are some things to think about:
- Valuation. AMD stock is valued around where the market average is when compared to its competitors. Advanced Micro Devices trades with a P/E ratio of over 40, while Intel’s (Nasdaq: INTC) is around 10 and NVIDIA’s (Nasdaq: NVDA) is well over 80. It’s not the most overpriced option, but it’s not the most underpriced one, either.
- Volatility. The stock price of AMD frequently swings wildly. Volatility raises the stakes and hence carries a greater risk. If you’re not willing to take some chances, this stock is not for you.
- Dividends are not offered by AMD. Last but not least, dividends have never been paid by the corporation, and there is no reason to expect that to change in the future. It’s not the best stock to buy if you’re looking for dividends.
Only you can decide if buying AMD stock is a good idea. If you’re a tech investor who enjoys risk and is ready to take the plunge in the hopes of another good year, this one could be for you. There is no denying that the firm has developed a formidable enterprise, one that ranks among the top three in CPUs and GPUs, and that it has had remarkable development in terms of both sales and profitability.
But there’s also the issue that the firm doesn’t pay dividends and the fact that the stock is volatile. Do your own research and make your own judgment before making any investment decisions related to AMD. Remember that you can never fully trust the advice of analysts and specialists.