Is It Too Late to Buy This Semi-Conductor Stock?

This semi conductor manufacturer has turned in a fine performance on the stock market in 2021, with shares of the chipmaker soaring more than 66% so far and easily outpacing the broader market’s growth. But what about investors who worry about missing the…

Advanced Micro Devices (NASDAQ:AMD) gravy train and are thinking of buying the stock so that they don’t miss out on further gains? Does it make sense to buy this hot tech stock after its big rally in 2021? Let’s find out.

AMD stock has become expensive thanks to its terrific growth

The first thing that potential AMD investors may want to look at is the stock’s valuation. It has a price-to-earnings (P/E) ratio of nearly 47 and a price-to-sales ratio of 12.5. The valuation isn’t cheap when compared to the S&P 500‘s earnings multiple of 28.7 and sales multiple of 3.2. AMD was also trading at cheaper multiples at the beginning of October, before an outstanding earnings report and a potentially lucrative contract sent its shares soaring and inflated the valuation.

However, AMD’s rich valuation seems justified, as the chipmaker has been clocking outstanding growth quarter after quarter. Its revenue shot up 54% year over year in the third quarter to $4.3 billion, while adjusted earnings jumped 78% from the prior-year period to $0.73 per share. AMD raised its full-year guidance once again and now expects revenue to increase by 65% in 2021, which would be a big improvement over the 45% annual revenue growth it had clocked in 2020.

So, the valuation shouldn’t be a concern for investors who are on the sidelines and wondering if it makes sense to buy AMD after the stock’s impressive run in 2021. The company is now trading at a…

 

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