Semiconductor giant Advanced Micro Devices (NASDAQ:AMD) is preparing for a potential 12% rally, as it retests a long-standing resistance trendline. The target price for bullish investors is set at $119, marking a significant increase from its current position near $106, as of Tuesday. This optimistic forecast comes despite a notable 55% year-on-year revenue drop in Q2 within AMD's Client segment.
The company is expected to benefit from a 7% surge in notebook sales over August, according to projections by Citi analysts. AMD's products are frequently paired with those from Intel (NASDAQ:INTC), which recently reported better-than-expected quarterly results. InvestingPro data shows AMD's revenue for the second quarter of 2023 at 21.88 billion USD, although the revenue growth has been slowing down recently, at 1.39%.
The semiconductor industry, which includes companies such as Nvidia (NASDAQ:NVDA), ASML, Lam Research (NASDAQ:LRCX), Taiwan Semiconductor, GlobalFoundries (NASDAQ:GFS), Samsung (KS:005930), and Intel alongside AMD, generated revenues of just under $600 billion in 2022. Semiconductors are computer chips that process electrical current for computing and come in various forms like diodes, transistors, and integrated circuits.
Investors are closely monitoring the production ramp-up of AMD's MI300 accelerator chip. Citi predicts that this product could generate $1 billion in revenue by 2024. However, there remains investor skepticism around the rollout pace and returns from AMD’s Xilinx (NASDAQ:XLNX) acquisition. According to InvestingPro Tips, AMD operates with a moderate level of debt and its stock price movements are quite volatile, which may add to this skepticism.
Despite geopolitical risks outlined by Deutsche Bank (ETR:DBKGn)'s Jim Reid, US Retail Sales for September saw a robust increase of 0.7%. This positive economic data may provide a conducive environment for AMD's projected rally. It's worth noting that AMD's market cap, according to InvestingPro data, stands at 166.09 billion USD, reflecting its significant presence in the industry.
AMD's stock has been on a downward trend since May 30 but touched the 200-day Simple Moving Average (SMA) in late September. On Monday last week (October 10), AMD stock closed above the trendline. If it breaks the $109 resistance level, it could aim for the $119 target. Yet, one should bear in mind InvestingPro's fair value estimation for AMD at 98.33 USD.
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