What happened
Shares of semiconductor company Advanced Micro Devices (AMD 1.85%) were trading a little higher on Thursday after Bank of America encouraged investors by reiterating its buy rating for the company. The stock finished the day up 7%.
Including today's gains, AMD is a big market beater so far in 2020, up over 20% in value. But like most stock journeys, it's been anything but smooth.
So what
Semiconductor stocks are controlled by the delicate balance of supply and demand. Oversupply leads to lower prices of products and a cut in production, a double whammy for a company's revenue. But there are signs pointing to an improving semiconductor cycle.
New video game consoles are set to launch later this year, and Bank of America sees this as another catalyst for semiconductor demand. That's why BofA is comfortable saying AMD is a buy with a $65 price target, implying around 15% more upside. And it seems investors are buying into that bullish sentiment.
Image source: Getty Images.
Now what
Keep in mind that Bank of America's call isn't really material news for investors. It's true AMD will benefit from video game system launches later in 2020, but this was already known before today. Stocks will temporarily move up and down as prominent analysts voice their opinions. But things like revenue and earnings growth are what move top stocks over the long haul.
On that subject, AMD is in a better financial position right now than it was last time video game consoles launched, and it's something investors should be mindful of. The stronger footing could make this stock worth buying right now.
