Technical Charts indicate a bullish trend for Advanced Micro Devices, Inc stock. Analysts are also bullish on AMD stock.
Shares of silicon chip maker Advanced Micro Devices, Inc (NASDAQ:AMD) didn't have a good month (March 2017) compared to their usual standards. AMD stock was down more than 8% before recovering in the last two days and closing the month at $14.55, down 2.7% for the month of March. For the year, AMD stock is up almost 30%, compared to a 9.5% gain in Nasdaq Composite (INDX:COMPX). AMD stock had fallen more than 12% in the two days following the Ryzen disappointment. The fall in the stock price had broken an important support level for AMD stock. As can be seen in the AMD technical analysis chart, AMD stock had closed below the 20-day simple moving average support line on higher volumes. The bearish crossover over the 20-day moving average was accompanied by a bearish crossover in the Moving Average Convergence/Divergence (MACD) oscillator.
MACD is a widely followed technical indicator by traders as it combines both trend lines and momentum indicator. MACD line generates buy and sell signals when it makes a crossover with the signal line or zero center line. As can be seen in the AMD technical chart, the MACD line had crossed the signal line from above, which is generally a sell signal. Since making the bearish crossover, AMD stock has been trading around the 20-day simple moving average line, with the 20-day SMA acting as a resistance.
AMD stock had made a couple of attempts to break the resistance but had remained unsuccessful. The stock had broken above the 20-day resistance on March 13th, only to fall back below the resistance line. After trading along the resistance line for the most part of the month, AMD stock, in a bullish move, broke out above the 20-day moving average line. The breakout above the resistance was accompanied by a bullish crossover in MACD. In a bullish move, MACD crossed over the signal line from below, providing further strength to the break out in AMD stock price. However, AMD stock might face some resistance as it has hit the upper of the Bollinger bands.Improving PC sales could be a further boost to AMD stock.
While the technicals have turned bullish, the news is good on the growth front too. According to Oppenheimer analyst Rick Schafer, the PC market is likely to plateau this year, which is a good news for the likes of AMD and Intel (NASDAQ:INTC). The PC market has been contracting over the past five years. Desktops and notebooks unit sales are likely to come in "flat" compared to 2016. Given the competitive pricing, AMD’s Ryzen CPU could drive market share gains. To quote Rick Schafer:
"While NT channel inventory concerns some, all of our checks forecast units (DT/NB) flattish in 2017, a marked improvement from the nearly 10% annual declines witnessed the past couple of years. AMD’s Ryzen CPU appears competitive and could drive 2Q share gains assuming a clean ramp."
While the Ryzen CPU's might not have lived up to the hype, the bearish sentiment is likely overdone. Most of the criticism is in the context of gaming performance, and specifically, with respect to lower resolution gaming, which the company is aggressively working on. In fact, AMD recently announced "the completion of initial optimization of "Ashes of the Singularity" for AMD Ryzen desktop processors resulting in significant performance increases." For the most part, Ryzen 7 is highly competitive with Intel's eight-core i7-6900K. Also, AMD is scheduled to release Ryzen 5, its mass market product, on April 11. The low price range of Ryzen 5 will very likely result in AMD taking market share from Intel (NASDAQ:INTC). And then, there are the Vega GPUs. At a tech summit in Beijing, China, Scott Herkelman, VP of AMD disclosed some details about the Vega GPUs which are likely to give competition to NVIDIA's GTX 1080 Ti. Radeon RX Vega graphics cards are likely to be faster and also much smaller, which could allow them to fit into gaming laptops and smaller notebooks.AMD stock still has upside left.
Given the strong rally in the stock and the disappointment on the Ryzen front, some investors are betting against AMD stock. The short interest in AMD stock in now at a one year high. In the latest reporting period, the number of shorted shares jumped from 104.6 million shares to 114 million shares, an increase of over 10 million shares. The short interest in AMD stock is currently around 14% of the float. But given the positive cues from technical charts and new product launches, Advanced Micro Devices, Inc (NASDAQ:AMD) stock still has some upside left. In a recent report, Jefferies’ analyst Mark Lipacis reiterated his price target of $16 for AMD stock stating that the recent checks in the Asia PC supply chain point towards a “systemic turnaround” at Advanced Micro Devices, Inc. AMD stock also got a price target upgrade from Canaccord Genuity. Analysts Matthew Ramsey and Logan Bender raised their price target on AMD stock from $14 to $17. All in all, AMD stock still has upside left in spite of the recent run.
Looking for great tech stocks to buy? Then do check out Amigobulls' top stock picks, which have beaten the NASDAQ by over 134%. If you're looking for top picks from the auto sector, you should also check out our top auto stock picks, which have beaten the S&P 500 by over 172%.