Advanced Micro Devices At Cusp Of A Major BreakoutAMD has completed a cup and handle breakout pattern following a 3-month consolidation at the 2020 high.
Advanced Micro Devices Inc. (AMD) has defied skeptics so far in 2020, posting an all-time high in February and then recouping a 38% pandemic-driven decline by mid-April. Rally momentum stalled after the company reported inline Q1 2020 metrics one week later, highlighted by 40% growth in year-over-year revenue. Mixed guidance failed to stir buying interest, triggering an 11% downdraft that found support at 49. That trading floor has held firm into the third quarter.
Well-respected CEO Dr. Lisa Su took a victory lap after the report, declaring “we executed well in the first quarter, navigating the challenging environment to deliver 40% year-over-year revenue growth and significant gross margin expansion, driven by our Ryzen and EPYC processors”. She offered a sober-but-upbeat outlook, noting “while we expect some uncertainty in the near-term demand environment, our financial foundation is solid and our strong product portfolio positions us well across a diverse set of resilient end markets”.
AMD Taking Market Share From Rivals
Advanced Micro Devices should benefit from repeated delays in Intel Corp. (INTC) server platform and other time-sensitive projects, allowing the smaller fabricator to take market share. It’s also growing central processing unit (CPU) sales at a healthy clip and has grabbed a fair share of the graphics processing unit (GPU) market from rival NVidia Corp. (NVDA). That segment has been growing exponentially since pandemic shutdowns began in the first quarter.
Wall Street And Technical Outlook
Wall Street consensus now rates the chip stock as a ‘Moderate Buy’, with 12 ‘Buy’ and 9 ‘Hold’ recommendations. No analyst currently advises that shareholders sell their positions and step to the sidelines. Price targets range from a low of $33 to a street-high $70 while the stock is now trading more than $7 below the median $57.50 target. This positioning bodes well for additional gains in the third and fourth quarters.
Advanced Micro Devices’ technical outlook is much stronger now than three months ago, with the stock carving a horizontal trading range at the February 2020 high. In turn, this price action has completed the handle in a bullish cup and handle pattern that forecasts an impressive breakout, with the potential to reach a measured move target in the lower 80s. That rally, if it unfolds, would book an impressive 35% and 40% return from the currently-traded level.