AMD stock forecast for 2020 and beyond

Advanced Micro Devices rose by 142 per cent during 2019. Will it last? Our AMD stock forecast looks at the threats and opportunities for the company.

For Advanced Micro Devices – known as AMD for short – 2019 was a whirlwind. The semiconductor company began January 2019 at $19, marching to $46 by year end. It was a rise of 142 per cent and took the company’s stock to a share price that hasn’t been seen since 2000. AMD has clocked further highs so far in 2020, nearing $52 in the middle of January. Here, we’re going to look at the AMD stock forecast for the coming months – and explore the factors behind its runaway performance.

Advanced Micro Devices (AMD) news

First, let’s remind ourselves about what AMD is known for. The company was founded back in 1969. Among other things, it manufactures the microprocessors found in PCs – and tens of millions of Windows computers have been powered by its technology. When it comes to market share, 0'>AMD has been a distant second to Intel for some years, but recent developments have given the company momentum.

Over the course of 2018, AMD's stock market performance seemed unstoppable. Its share price rose from about $10 to $17, a jump of 70 per cent (prices spiked in September of that year, ballooning to $32). As we’ve already seen, this explosive growth has continued ever since.

The AMD stock forecast has been upbeat thanks to a complete change in strategy, which began when Dr Lisa Su was appointed the company’s new CEO in the autumn of 2014. At the time, the company was facing financial challenges, and continually losing market share to the likes of Intel and NVIDIA. Under her leadership, AMD has performed extensive research on future trends – aggressively investing in the development of high-performance computing products that will satisfy the market’s needs a few years down the line.

Some lines of AMD processors, such as the Ryzen, have been regarded as superior to Intel’s in terms of performance. This has naturally paid dividends in terms of sales, with retailers reporting that AMD has been comfortably outselling Intel when it comes to certain products.

The AMD long-term outlook has also been rosy because of how the company has won lucrative contracts to provide key components for upcoming games consoles from Microsoft and Sony alike. The new iterations of the Xbox and PS5 are set to be sold in their millions, and all of this will undoubtedly help AMD’s bottom line.

How high will AMD stock go?

The question now is whether there are clouds on the horizon for the AMD stock forecast. Previous spikes in the company’s share price have normally been followed by a precipitous fall. Just look at what happened when the dot-com bubble burst at the start of the millennium. Between June 2000 and October 2002, the stock’s value plunged by 94 per cent.

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Analysts with a particularly long memory are going to remember this when making AMD stock predictions. Indeed, just look at this CNN Business poll of 32 analysts. Although the median forecast for the stock is $49, a decline of just 1.5 per cent of current levels, one low-end prediction warns that AMD’s share price could be as low as $8 in 12 months’ time – 83.9 per cent lower than where it is now. (For the sake of balance, it is worth remembering that some strategists believe the stock could rise 30.7 per cent by the end of 2020.)

In the fourth quarter of 2019, revenue was 50 per cent higher than the same period a year earlier – with the company’s computing and graphics segment driving much of this growth. As a result, Dr Su told CNBC that this saw AMD achieve revenue of $6.7bn over the course of the year – its highest level ever. Although the company is expecting further growth of 30 per cent over 2020, unquestionably a healthy figure, this slowdown may weigh heavily on the company’s share price going forward. Some analysts have openly admitted that AMD’s current valuation makes them nervous.

Another potential threat lies in how 0'>AMD outsources the production of certain components to companies such as Taiwan Semiconductor Manufacturing. Supply levels can be tight at the best of times, and the combined threats of the coronavirus and the ongoing US-China trade war could have an impact. Part of AMD’s growth in the past year is attributable to how Intel suffered a shortage of PC processors – affecting the likes of HP and Dell. A supply crunch at AMD could undo a lot of the progress that the company has made in recent months.

FURTHER READING: Accenture share price forecast for 2020

FURTHER READING: Alphabet share price forecast for 2020 and beyond

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