‘Hold On For Now,’ Says Investor About AMD Stock

The buzz around Advanced Micro Devices (NASDAQ:AMD) has been building of late. After a rough stretch, it seems like AMD’s fortunes are turning around.

A few pieces of news have hit the airwaves over the past couple of days, including AMD’s decision to offload the manufacturing portion of ZT Systems for $3 billion to Sanmina. AMD will be keeping ZT’s engineering team, however.

A number of Wall Street analysts applauded the move by reiterating Buy ratings, believing that it positions AMD to better compete with Nvidia in the lucrative AI market.

This comes on the heels of the company’s $10 billion partnership with the Saudi Arabian HUMAIN, which was announced last week.

Over the past month and a half, AMD has surged by over 40% — a welcome change following almost a year of falling prices. Is this the start of a strong upswing?

Though investor Joseph Parrish likes what he sees, he is not so sure now is the right time to buy.

“AMD is fairly valued at current prices, offering no margin of safety for new investors given the growth assumptions required,” says the investor.

Parrish notes that AMD has been experiencing healthy growth, especially with its data center segment. Though free cash flow grew to $727 million in Q1 (up significantly year-over-year), the investor points out that AMD has been spending heavily on open-market buybacks.

“Q1 was an instance of what I discussed previously: a company with strong upside balanced by premium buybacks,” adds Parrish.

Indeed, Parrish believes that AMD will continue to enjoy growing free cash flows, due to a strong appetite for its products. This will be supported by demand for domestic data centers, explains the investor, which should help AMD avoid tariff-related risks.

However, looking at the company’s 5-year free cash flow average, Parrish simply does not seem much upside for investors buying in at current levels.

“In my view, AMD isn’t undervalued, and that’s the main deterrent from buying,” concludes Parrish, who rates AMD a Hold (i.e. Neutral). (To watch Parrish’s track record, click here)

Wall Street, on the other hand, believes that there is room for growth. With 22 Buy and 9 Hold ratings, AMD enjoys a Moderate Buy consensus rating. Its 12-month average price target of $126.55 would yield gains in the low double digits in the year ahead. (See AMD stock price)

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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.