Shares of Advanced Micro Devices (NASDAQ: AMD) have had a rough year, but that is not to say that they are alone in this. Escalating interest rates, supply-chain issues, and skyrocketing energy prices have put pressure on many companies across various industries. After a robust couple of years, then, AMD has taken a pretty big hit losing roughly one-third of its value in Q1 2022.
Despite this, though—or perhaps even because of it—analysts have noted that AMD could quickly return to the climb it had been making for roughly the last half-decade.
AMD Has Been Climbing the Market
For the past few years, investors have regarded Advanced Micro Devices as a safe place to park some cash. Indeed, the semiconductor-maker has followed a steady upward cycle. Dotted with a few dips here and there, AMD shares have made a consistent climb for at least the previous four years.
As a matter of fact, AMD has shown significant gains every quarter, beating EPS estimates consistently for the past ten consecutive quarters. The last four quarters, specifically, has been characterized by 19% earnings growth on average with an astonishing 25% growth in the most recent quarter. And then, in the final quarter of 2021, AMD beat its $5 billion revenue estimate by another impressive 17%.
The New Year Brings New Challenges
Since the start of 2022, however, AMD shares have taken a big hit. Again, complications of the pandemic coupled with social and political unrest across the globe have put an end to the recent upward trend in semiconductor sales. Accordingly, this industry as a whole has resulted in several double-digit valuation dips over the last year.
This adverse momentum in price action has been quite discouraging for investors. As such, sellers have maintained control of this market sector throughout most of the year; and they continue to reload at every available opportunity. All of this together, then, has broadly shifted the sentiment regarding AMD shares.
A Light At the End of the Tunnel
As with most things in the stock market, what goes down will often go back up, mostly because bear investors will eventually grow weary of the action and momentum will begin to slow.
So while AMD—and the entire semiconductor market—may have faced a tough first quarter, many analysts advice that it is poised for a significant rebound. Some analysts estimate the semiconductor giant will pull in approximately $26 billion in sales for fiscal year 2022. This means by the end of the year, AMD will post a stupefying 57% increase from the same period the year prior. Finally, they anticipate an impressive bottom-line expansion of 33% across the coming three to five years, starting with a 13% expansion forecast for fiscal year 2023.
For fiscal year 2021, AMD reported annual sales of $16.4 billion.
Why AMD Shows Promise Over the Next Few Years
The pandemic has helped to expose our reliance on companies like AMD, who manufacture these microchips. Semiconductor-based technology made it easier for more people to work from home but also made it more convenient to shop from home and to communicate with people at a distance.
AMD products have also helped the video game industry grow significantly at a time when people had quite a bit more time to spend on such things. And since the popularity of video games is not slowing down in the least, growth in that industry is poised to continue to accelerate over the next several years. Fortunately for AMD, they have positioned themselves as a reliable source of microchips for companies in the gaming sphere who will likely need very niche-specific processors for their computer systems.
AMD Could Bounce Back Soon
All this in mind, it is important to remember that while AMD may appear to be on a rather quick decline, the long-term picture shows far more promise. Obviously, the technology that people have become more acquainted with during the pandemic will become more and more accessible; and that means they need for microchips will increase as well. Analysts advise, then, that this can only lead to significant growth in both the top and bottom line for AMD.
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