Advanced Micro Devices (NASDAQ:AMD) stock has been on a rough ride, plunging 53% over the past 12 months and dropping below the $100 mark for the first time since October 2023.
Even a record $12.6 billion in data center revenue for 2024 couldn’t turn things around. Instead, investors are hung up on AMD’s weaker-than-expected Q1 2025 guidance, slowing AI investments, and geopolitical uncertainty. To make matters worse, Nvidia’s margin squeeze has only added to fears about profitability in the AI chip space.
Yet, not everyone is running for the exits. Top investor Quad 7 Capital sees the stock’s sharp drop as a rare buying opportunity.
“AMD stock has dropped significantly, but we see a mean reversion opportunity with a strong value and growth combination,” asserts the 5-star investor, who sits in the top 2% of TipRanks’ stock pros.
Quad 7 highlights AMD’s solid earnings performance in 2024, including a Q4 revenue beat. The investor also pushes back against margin concerns, pointing out that GAAP gross margins hit 51% in Q4, a slight but meaningful uptick from 50% in Q3.
“This is not bad news here folks,” notes Quad 7. “We are encouraged by the present widening of margins.”
Taking a measured approach, the investor projects AMD’s annual revenue to hit $31 to $32 billion in 2025, representing 22% growth. Based on an estimated 52% margin, Quad 7 calculates an EPS range of $4.40 to $5.00 – a potential 40% jump at the midpoint.
“The valuation and growth combination could not be clearer. It will take a significant underperformance and ramping down of expectations to keep the stock pinned down for an extended time,” concludes Quad 7 Capital, who rates AMD a Buy. (To watch Quad 7 Capital’s track record, click here)
Wall Street largely shares this bullish view. With 25 Buys, 11 Holds, and just 1 Sell recommendation, AMD commands a Moderate Buy consensus rating. Analysts peg the stock’s 12-month average price target at $147.88, implying 53% upside from current levels. (See AMD stock forecast)
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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.