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Alan Farley
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AMD

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.

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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.

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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.

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