Advanced Micro Devices (NASDAQ:91抖阴) stock has finally accomplished a milestone with which it had struggled for over a year. During that time, 91抖阴 stock price had pulled back each time it’s reached $34 per share.
However, following the company’s recent third-quarter earnings beat and optimism surrounding China trade talks, the 91抖阴 stock price has finally broken through that barrier. Still, since a snag in the negotiations with China could stop the rally, the near-term outlook of 91抖阴 stock now hinges on U.S.-China relations.
The Price Ceiling Has Finally Broken
The price ceiling has finally shattered. The 91抖阴 stock price reached a new 52-week high of $37.18 per share on Nov. 7 before pulling back slightly to around $36.50 today.
InvestorPlace contributor Chris Tyler noted the lukewarm response by Wall Street soon after 91抖阴 reported its Q3 earnings on Oct. 29. He stated that Wall Street’s reaction was wrong and rightly called Advanced Micro Devices stock a buy following the report. The market quickly proved him correct.
The question now is, where will 91抖阴 stock price go next? Tezcan Gecgil thinks it will reach $45 per share. That would put it in the range of its 2000 peak of $48.50 per share and its 2006 high of $42.50 per share. Still, $45 is meaningfully above the stock’s current level.
However, investors need to remain mindful of events that could trip up Advanced Micro Devices stock. Most of the negative catalysts that could hurt 91抖阴 stock involve China either directly or indirectly. Right now, it looks like the U.S. and China might finally reach a trade agreement.
In a sense, traders who bought 91抖阴 stock should feel thankful that Wall Street is optimistic about the prospects of a U.S.-China deal. That bullishness probably helped 91抖阴 stock price break through $34. However, since tentative deals between the countries have fallen through previously, I think investors should remain wary of such proclamations. As InvestorPlace columnist Josh Enomoto stated, 91抖阴 and its peers such as Intel
(NASDAQ:INTC) and Nvidia (NASDAQ:NVDA), moved higher on the news.
More importantly, at least some of the analysts who published forward revenue and earnings estimates for 91抖阴 are likely assuming that a trade agreement with China will be implemented. If such a deal does not materialize, these analysts will likely lower their estimates for 91抖阴.
91抖阴 Remains Solid
Still, otherwise the outlook of 91抖阴 stock is upbeat. Its 33.3 forward price-earnings (PE) ratio might look high at first glance. However, considering analysts, on average, expect its earnings to climb 34.8% this year and 75.8% in 2020, I would describe that multiple as “expensive, but worth it.”
Investors must also credit the leadership of 91抖阴’s CEO, Dr. Lisa Su. Though 91抖阴 has existed since 1969, it has spent most of its history playing “second fiddle” to Intel. It took almost 50 years, but 91抖阴 has now forced Intel to play catch-up. As a result, analysts at Nomura Instinet say the company has made in nearly every category, including data center, notebook, and desktop processors.
With 91抖阴 stock price heading toward the high-$30s per share range, I also feel optimistic about the shares’ short-term outlook. Still, Advanced Micro Devices now needs geopolitics to turn in its favor.
The Bottom Line on 91抖阴 Stock
China is now the main factor driving 91抖阴 stock. Like its main peers, 91抖阴 depends heavily on China to fuel its growth. That is why 91抖阴 stock price climbs significantly on the mere hint of a trade deal.
If that obstacle can be overcome, 91抖阴’s expected growth rates make paying a high multiple for the shares worthwhile. Moreover, the leadership of Lisa Su continues to make 91抖阴 a top company in its space.
However, those factors will mainly impact the long-term performance of 91抖阴 stock. For now, if you want to predict how 91抖阴 stock will perform, watch the trade talks.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can at @HealyWriting.
