Advanced Micro Devices (NASDAQ:AMD) stock is on an unmistakable roll as it approaches its Q2 2025 earnings release, scheduled for today after market close. The share price has more than doubled since hitting a low in early April, catapulting AMD up the ranks of AI stock winners amid improving market sentiment, stepped-up capex from hyperscalers, and rising conviction that its latest products can credibly challenge Nvidia for market share.
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But despite the sizzling rally, expectations for Q2 itself remain relatively muted. Revenue is projected to dip slightly from Q1, and EPS is expected to swing into the red – a reflection of growing pains tied to the MI300 ramp and fallout from the now-reversed China export restrictions. The Street is looking for $7.43 billion in sales and a GAAP EPS of -$0.05, compared to Q1’s $7.44 billion and $0.44, respectively.
And yet, there’s no question that AMD has expanded significantly over the past year, having grown by leaps and bounds from its Q2 2024 revenues of $5.84 billion.
That’s the inflection point where AMD finds itself on the eve of its earnings report. Top investor Yiannis Zourmpanos puts it bluntly: “The key question ahead of the report isn’t whether AMD is growing, but whether the quality of that growth is strong enough to justify its valuation.”
Zourmpanos, who is among the very top 1% of TipRanks’ stock pros, argues that AMD is definitely worth its very reasonably priced valuation. While acknowledging that the Q2’s profits will be way down, the investor also believes that this quarter will serve as the trough for AMD.
To support this thesis, Zourmpanos cites temporary developments that are pressuring margins this time around. This includes the MI300 ramp, which has assorted costs related to increased memory, complex packaging, and thus far unfavorable pricing.
Another damper on near-term earnings was AMD’s capex investments on ROCm development and AI compiler integrations, technical advances that Zourmpanos believes will help the company build a strong ecosystem moat that will support the company’s long-term prospects. Wall Street forecasts seem to support that outlook, with EPS expected to bounce to $1.13 in Q3 and $1.34 in Q4.
In short, patience may pay off.
“If margins stabilize and guidance confirms EPS rebound, the stock’s re-rating toward $200+ is underway,” concludes Zourmpanos, who rates AMD shares a Strong Buy. (To watch Yiannis Zourmpanos’ track record, click here)
AMD also has decent support on Wall Street, but its current valuation presents a conundrum. The Moderate Buy consensus rating is based on 24 Buys, 10 Holds, and one Sell. However, share gains have been piling up steadily, and the $156.47 average price target now suggests the stock could decline by 11% over the next 12 months. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.