Advanced Micro Devices (AMD) closed lower on April 27 after Northland Capital issued a dovish note in its favor, just days ahead of its Q1 earnings in May. 5.
Analyst Gus Richard downgraded the chipmaker to “Market Perform,” citing a “too far, too fast” rally. He maintained his price target at $260, indicating potential downside of about 22% from here.
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Despite today’s pullback, AMD stock remains up a remarkable 70% versus its recent low.
www.barchart.comAMD Stock Is Trading at a Stretched Multiple
In his research note, Richard said the downgrade isn’t necessarily a reflection of poor fundamentals. In fact, they expect AMD to execute a beat and raise on May 5.
The consensus is for the semiconductor firm to post $1.04 per share in earnings for its fiscal Q1, which would mean a 33% year-over-year increase.
However, the Northland analyst argues that much of that upside is already baked in, with AMD shares trading at a rather stretched 53x forward earnings.
Plus, Advanced Micro Devices has its relative strength index (RSI) in the low 80s currently, indicating overbought conditions that often trigger a near-term pullback.
Where Options Data Suggests AMD Shares Are Headed
According to Gus Richard, AMD’s gross margins in the mid-50% range are healthy, but the firm faces stiff competition as Intel (INTC) closes the technical gap and Nvidia (NVDA) maintains its grip on AI infrastructure.
Moreover, artificial intelligence spending may cool as hyperscalers move toward more disciplined, usage-based models, potentially hurting Advanced Micro Devices even further as the year unfolds, he told clients.
Recent insider selling involving CTO Mark Papermaster and even CEO Lisa Su adds another cautionary signal to the bearish thesis for AMD stock.
According to Barchart, options data also suggests the semiconductor stock could be trading around $303 just days after its Q1 earnings, indicating potential downside of more than 9% from here.
What’s the Consensus Rating on Advanced Micro Devices?
Other Wall Street analysts also seem to agree with Richard’s “too far, too fast” thesis on Advanced Micro Devices.
While the consensus rating on AMD shares remains at a “Strong Buy”, the mean price target of about $291 signals potential for another 13% decline from here.
www.barchart.comThis article was created with the support of automated content tools from our partners at Sigma.AI. Together, our financial data and AI solutions help us to deliver more informed market headline analysis to readers faster than ever.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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