AMD Stock Already Priced for Perfection, and Then Some

It has easily been one of the year’s top-performing names. Advanced Micro Devices (NASDAQ:AMD) has more than doubled since reaching a low near $16. It’s going strong too, with AMD stock testing the waters of multi-year highs just this week. The bulls continue to charge.

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The sentiment is certainly understandable. The turnaround effort CEO Lisa Su led when she took the helm worked. Revenue growth pushed the company back into the black last year. The company is expected to report a profit of 65 cents per share this year, and reach earnings of $1.03 per share in 2020.

That expected progress for the foreseeable future, however, doesn’t inherently mean the AMD stock price will rise in conjunction with those results. Analysts still contend Advanced Micro Devices stock already fully reflects a bright future.

AMD Stock Graduates from “Turnaround Story”

There’s no denying AMD is back from the dead. Pushed around by Nvidia (NASDAQ:NVDA) within the GPU market and pressured by CPU giant Intel (NASDAQ:INTC), as of 2015, the company appeared to be on its last leg.

Clearly it wasn’t.

Investors who bet on a rebound have been handsomely rewarded too. AMD stock went up significantly since early 2016, when the company began unveiling new graphics cards and the crypto-mining craze was at full stride.

The underpinnings for those bullish bets have changed in the meantime, though most investors have yet to make the mental adjustment. They continue to see AMD as a turnaround in progress. The turnaround is largely complete.

The market is willing to tolerate outrageous valuations in anticipation of future profits, even if those profits are years down the road. More normalized earnings are now in view, undermining the turnaround thesis. Advanced Micro Devices stock is, for all intents and purposes, another tech stock.

The projected results and corresponding valuations serve as a partial warning.

Working its way out of the red provided…

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