Semiconductor company Advanced Micro Devices, Inc. (AMD - Get Rating) recently announced its collaboration with the Energy Sciences Network on the launch of ESnet6, the newest generation of the U.S. Department of Energy’s high-performance network dedicated to science.

However, amid escalating macro headwinds, chip demand has been slowing, which could hurt AMD’s revenues. On October 6, 2022, AMD slashed its revenue guidance for the third quarter. The company expects approximately $5.60 billion in sales, about $1.10 billion less than earlier estimates.

AMD has lost 25.5% over the past month to close the last trading session at $57.23. It has lost 60.2% year-to-date and 50.8% over the past year.

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

Bleak Bottom Line

For the second quarter that ended June 25, 2022, AMD’s net revenue came in at $6.55 billion, up 70.1% year-over-year. However, its operating income came in at $526 million, down 36.7% year-over-year. Its net income came in at $447 million, down 37% year-over-year, while its EPS came in at $0.27, down 53.4% year-over-year.

Mixed Valuations

AMD’s forward EV/EBITDA of 11.21x is 3.33% lower than the industry average of 11.60x. Its forward Price/Book of 1.62x is 55.8% lower than the industry average of 3.66x.

However, AMD’s forward EV/Sales of 3.81x is 50.5% higher than the industry average of 2.53x. Its forward Price/Sales of 3.88x is 61.1% higher than the industry average of 2.41x. Moreover, its forward P/E of 29.36x is 46.9% higher than the industry average of 20.00x.

Poor Momentum

AMD is trading below its 50-day moving average of $77.70 and its 200-day moving average of $96.47. In addition, it’s currently trading near its 52-week low of $54.57, which it hit on October 13, 2022.

POWR Ratings Reflect Bleak Prospects

AMD has an overall rating of D, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

AMD has a C grade for Growth and Value, consistent with its mixed financials in the last reported quarter and mixed valuation multiples, respectively.

In addition, it has a D grade for Stability, in sync with its beta of 2.05.

In the 93-stock Semiconductor & Wireless Chip industry, AMD is ranked #87.

Click here for the additional POWR Ratings for AMD (Momentum, Sentiment, and Quality).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

AMD’s bottom line has declined significantly. Moreover, analysts expect its EPS to decrease 6.8% year-over-year to $0.68 for the quarter ended September 2022, while it is expected to fall 14.1% year-over-year to $0.79 for the quarter ending December 2022. Given AMD’s grim outlook and poor momentum, I think AMD might be best avoided.

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

While AMD has an overall POWR Rating of D, one might consider looking at its industry peers, STMicroelectronics N.V. (STM - Get Rating), Xperi Holding Corporation (XPER - Get Rating), and Renesas Electronics Corporation (RNECF - Get Rating), which have an overall A (Strong Buy) rating, and Photronics, Inc. (PLAB - Get Rating), which has an overall B (Buy) rating.

AMD shares were trading at $57.60 per share on Thursday afternoon, up $0.37 (+0.65%). Year-to-date, AMD has declined -59.97%, versus a -22.29% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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