Advanced Micro Devices (NASDAQ:AMD) is a solid AI (Artificial Intelligence) play, thanks to its growing generative AI offerings. This is reflected in a significant year-to-date gain in AMD’s stock price, which has appreciated by about 130%. Although AMD is expected to benefit from opportunities in AI, it seems that the positives are already reflected in its current market price. Further, its expensive valuation could limit the upside potential.
It’s worth highlighting that AMD stock trades at a forward price-to-earnings multiple of 54.97, much higher than the sector median of 25.16. Further, its price /sales ratio of 10.41 is also higher than the sector median of 3.08 and its five-year average of 6.99.
With this background, let’s look at the Street’s forecast for AMD stock.
Is AMD a Buy, Sell, or Hold?
Wall Street is bullish about AMD stock, driven by substantial growth opportunities presented by AI. For instance, the company’s CEO, Lisa Su, expects the data center accelerator TAM (total addressable market) to grow at a CAGR of over 70% over the next four years and reach $400 billion in 2027. This opens up abundant avenues of growth for the company.
Goldman Sachs analyst Toshiya Hari raised AMD’s price target to $157 from $137 on December 17. The analyst reiterated his Buy rating on AMD stock, citing higher adoption of its “MI300 Data Center GPU offering across the cloud and enterprise markets.”
AMD stock has 26 Buy and eight Hold recommendations for a Strong Buy consensus rating. However, analysts’ average price target of $132.41 implies a downside potential of 10.99% from current levels.
Bottom Line
The solid adoption of AMD’s new AI GPU, its focus on broadening its product portfolio, and a large addressable market presents significant growth opportunities. However, its expensive valuation remains a concern, as reflected by analysts’ average price target, suggesting a potential downside from current levels.
