Shares of Advanced Micro Devices Inc. were headed higher in Tuesday morning trading after an analyst flipped to a bullish stance on the chip company, citing some long-held investment maxims.
“There are two old sayings in the investment world: 1) ‘You cannot time the market, so do not try’ and 2) ‘Buy good companies when they are down,’” Piper Sandler’s Harsh Kumar shared in a note to clients Tuesday.
Kumar acknowledged that his more cautious thesis on AMD
which was related to a slowdown in the market for personal computers and a lack of near-term accretion potential from the company’s acquisition of Xilinx, did not “appear to be playing out as expected.”
He said he was “using the recent price action to get constructive” once more on AMD’s stock, which surged 7.5% in midday trading. Shares have dropped about 30% on the year, while the PHLX Semiconductor Index
has lost 23%.
Kumar pointed to several “mid- to long-term catalysts” for AMD’s stock that he thinks still ring true. These include strong trends in the server market and within its semi-custom business, a well-timed push into commercial PCs, and positive growth impacts from Xilinx.
“From our perspective, the company’s core businesses are running really well and continue to benefit from secular trends,” he wrote in a note to clients, adding that AMD’s semi-custom business “is on-track for another strong year in 2022 and potentially growth again next year as well.”
Kumar further sees the company’s June investor day as a possible catalyst.
AMD shares are up 5.1% in Tuesday morning trading. They’re off 12% over the past three months, as the S&P 500
has slipped 8%, but ahead 33% on a 12-month basis. The S&P 500 has lost 3% over the past 12 months.