Like other AI chip stocks, Advanced Micro Devices (NASDAQ:AMD) has continued to be on a downward trajectory this month. Worse yet, the AMD stock sell-off could carry on, ahead of and after the chip designer’s upcoming quarterly earnings release.
Yes, if you already hold AMD in your portfolio, this may be disheartening to hear. After an incredible run-up in price between December and March, it may appear as though shares are going to cough back these gains.
But while this sell-off may continue in the immediate-term, there is a silver lining. A rebound may take shape pretty soon. That’s good news for anyone already owning AMD, and it’s especially good news if you’ve been waiting on the sidelines for an opportune entry point.
AMD Stock Earnings Preview: Prepare for a Possible Plunge
As seen with the April 19 sector sell-off, market anxiety about AI chip stocks has gone through the roof. Admittedly, these fears have dissipated. Recent earnings releases from other major tech names may help to assuage these concerns.
For instance, as InvestorPlace’s Alex Siriois recently argued, the latest results from a leading chip foundry indicate AI chip demand stayed strong throughout Q1 2024, and demand trends are likely to stay favorable throughout the year.
The latest guidance from a “Mag 7” component led to an after-earnings pullback, but these updates to guidance suggest that AI infrastructure spending by big tech will remain high.
Yet while reading the tea leaves tells us that the “AI boom” isn’t on the verge of becoming an “AI bust,” be careful. Don’t assume that AMD stock is going to experience a strong rally once it releases its latest results and guidance on April 30.
Despite no longer being “priced for perfection,” a jittery market is still expecting perfection with the earnings release. AMD’s updates to guidance could fall short of lofty expectations. Much like other tech names this earnings season, AMD may end up experiencing a post-earnings plunge.
Ingredients in Place for a Late-Year Recovery
Post-earnings, AMD stock could fall, as the market walks back future expectations, in line with the company’s guidance update. However, if expectations are walked back enough, this could set the stage for Advanced Micro Devices to exceed them.
Earlier this month, HSBC’s Frank Lee upgraded AMD from “hold” to “buy,” assigning the stock a $225 per share price target. Largely, because of AMD’s upcoming launch of several advanced AI data center chips. According to Lee, these new chips could enable AMD to capture 10-15% of this fast-growing market.
If this plays out, AMD’s 2025 AI revenue could come in between 35% and 103% above current consensus, and earnings per share may end up being as high as $9.20 per share. Once these chips debut, if initial sales numbers and channel checks signal that Lee’s bull case is playing out, this could help spark a recovery.
That’s not all. Other ingredients are in place as well for a late-year recovery. AI-PC chip adoption is expected to take off later this year. As we’ve discussed before, AMD has a strong lead in AI-PC chips. Beyond company-specific catalysts, there’s also a potential macro catalyst as well.
The Verdict: Grab it if Shares Re-Enter the ‘Screaming Buy Zone’
Growing indication that the Federal Reserve will keep interest rates “higher for longer” has been another factor weighing on tech stocks lately. However, this sentiment could change dramatically between now and the end of the year.
By late 2024, the Fed may be far more willing to reverse course on monetary policy. Much like what happened in late 2023, the broad market could experience a “rate cut rally,” with tech/growth names like AMD receiving an outsized boost.
Considering better times may be just a few months away, don’t let a possible post-earnings sell-off scare you out of an AMD stock position. Instead, hold onto existing positions. If the stock really sells off after earnings, consider it within the “screaming buy zone,” and hence worthy of a buy.
AMD stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.