Advanced Micro Devices Inc (AMD)

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Why Advanced Micro (AMD) Might be Well Poised for a Surge
By: Zacks Equity Research | February 25, 2022

Advanced Micro Devices (AMD) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this chipmaker, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Advanced Micro, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $0.91 per share, which is a change of +75% from the year-ago reported number.

The Zacks Consensus Estimate for Advanced Micro has increased 37.85% over the last 30 days, as nine estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $4 per share, representing a year-over-year change of +43.37%.

The revisions trend for the current year also appears quite promising for Advanced Micro, with 12 estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 21.66%.

Favorable Zacks Rank

The promising estimate revisions have helped Advanced Micro earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Advanced Micro because of its solid estimate revisions, as evident from the stock's 13.7% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.

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