Semiconductor company Advanced Micro Devices Inc. (AMD) in Santa Clara, Calif., operates through two segments: Computing and Graphics; and Enterprise, Embedded, and Semi-Custom. Its products include x86 microprocessors, chipsets, discrete and integrated graphics processing units, data centers, and professional graphics processing units.

The stock is down 35.3% in price year-to-date and 8.9% over the past month to close its last trading session at $93.06. In addition, it is currently trading 43.4% below its 52-week high of $164.46, which it hit on Nov. 30, 2021.

The company is undertaking various acquisitions and partnerships to boost its operational efficiencies and expand its product portfolio. However, while it recorded double-digit revenue growth in its last reported quarter, expected reduced consumer demand following the pandemic-driven heightened demand for PCs could hinder its growth.

Click here to checkout our Semiconductor Industry Report for 2022

Here is what could shape AMD’s performance in the near term:

Share Buy Back

In February, AMD’s board of directors authorized a new $8 billion share repurchase program. The authorization is in addition to a $4 billion share repurchase program the company announced in May 2021. The company has repurchased roughly $3 billion of AMD common stock under the May 2021 program. This exhibits the company’s strong cash flow generating capabilities.

Negative Bottom-line Growth

AMD’s revenue increased 48.8% year-over-year to $4.83 billion for the fourth quarter, ended Dec. 25, 2021. Its operating income increased 111.8% from its  year-ago value to $1.21 billion. However, its net income declined 45.3% from the prior-year quarter to $974 million. In addition, its EPS decreased 44.8% year-over-year to $0.80.

Premium Valuation

In terms of forward Non-GAAP P/E, the stock is currently trading at 23.03x, which is 22.2% higher than the 18.85x industry average. Also, its 5.81x forward EV/Sales is 87% higher than the 3.11x industry average. Moreover, AMD’s 25.01x forward Price/Book is 436.9% higher than the 4.66x industry average.

POWR Ratings Reflect Uncertainty

AMD has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AMD has a D grade for Stability. The stock’s 1.81  beta is consistent with the Stability grade.

Among the 96 stocks in the A-rated Semiconductor & Wireless Chip industry, AMD is ranked #63.

Beyond what I have stated above, one can view AMD ratings for Momentum, Growth, Quality, Value, and Sentiment here.

Bottom Line

AMD shares are down 35.3% so far this year. The stock could face additional pressure due to customers potentially canceling orders for AMD’s graphics processing units (GPUs) due to lower chip pricing overseas and expected reduced consumer demand following a period of heightened COVID-19-related demand for PCs. Furthermore, the stock is currently trading below its 50-day and 200-day moving average of $112.85 and $117.82, respectively, indicating bearish sentiment. In addition, given its premium valuation, we believe investors should wait for a better entry point in the stock.

How Does Advanced Micro Devices Inc. (AMD) Stack Up Against its Peers?

While AMD has an overall C rating, one might want to consider its industry peers, Photronics Inc. (PLAB), Semtech Corporation (SMTC), and STMicroelectronics N.V. (STM), which have an overall A (Strong Buy) rating.

Click here to checkout our Semiconductor Industry Report for 2022

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year

Top 10 Stocks for 2022

REVISED: 2022 Stock Market Outlook

7 SEVERELY Undervalued Stocks