AMD Stock Jumped After Its Report. I'd Wait for a Lower Price to Buy.
Key PointsAMD's revenue rose to a record $13.4 billion for the third quarter, up 45% from a year ago.
AMD's third-quarter results on November 3 sent its stock soaring. Management forecast revenue to grow more than 80% by 2027, double the previous long-term projection. Shares surged, jumping 7.5% to around $520 after-hours. Since then, the stock has fallen to about $490, 25% below its October 6 record close. The data center segment, which sells server processors and AI chips, drove most of the growth, with revenue nearly doubling to a record $8.5 billion.
AMD expects nearly $17 billion in revenue, a 66% increase from last year and 27% from the third quarter. Despite strong earnings, cash flow dropped to $554 million, or 4% of revenue, down from $1.5 billion a year ago. The company's inventory grew to $11.5 billion, with capital spending up to around $650 million. Management expects inventory and capacity spending to continue supporting growth.
Analysts expect AMD's adjusted earnings per share to reach around $16 in 2027, double this year's $5.12. With a price-to-earnings ratio of 31 on expected 2027 earnings, AMD stock could be justified at around $480, close to Tuesday's close and below its current price.
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