Advanced Micro Devices Inc (NASDAQ: AMD) and Eaton Corporation PLC (NYSE: ETN) are unfairly down following their earnings and, therefore, should be bought on the recent weakness, says famed investor Jim Cramer.
He loaded up on 75 shares of AMD and 25 shares of Eaton following the opening bell on Tuesday. His Charitable Trust now owns 425 shares of the chipmaker and 300 shares of the power management company in total.
Both AMD and ETN reported solid quarterly results and issued upbeat future guidance last week. Still, both stocks have lost about 7.0% in recent days.
Why is Cramer bullish on AMD stock?
Advanced Micro Devices came in ahead of Street estimates for its second quarter last week as data centre revenue more than doubled on a year-over-year basis.
The multinational based out of Santa Clara, California is the second-largest maker of data center chips after Nvidia. Jim Cramer is bullish on AMD stock because it recently raised its forecast for MI300X AI chips sales by some $500 million.
The Mad Money host expects Intel’s failure in strengthening its footprint in AI to also be a benefit for AMD in terms of market share gains.
Cramer’s optimism on AMD stock is widely shared by the Wall Street. Analysts currently rate the AI stock at “overweight” with upside to $188 on average. That suggests potential for a 40% gain from here.
Why did Jim Cramer buy Eaton stock?
Eaton also reported better-than-expected earnings for its second quarter last week and raised its full-year guidance for organic sales, margin, and adjusted per-share earnings.
Jim Cramer agrees that the industrial stock is now as inexpensive to own as some of its peers at writing. Still, about a 20% hit to ETN in less three months does warrant an investment, he told members of his investment club on Tuesday.
The Mad Money host particularly commended the power management firm’s upbeat guidance for the third quarter today as it bucks the broader concerns of an imminent economic slowdown.
Much like AMD, Wall Street shares Cramer’s optimism on Eaton stock as well. Analysts currently have an “overweight” rating on ETN shares that is coupled with a price target of $344 on average that translates to a more than 20% potential upside from here.
Eaton Corporation does also pay a dividend yield of 1.34% at writing, which makes up for another good reason to have it in your investment portfolio.
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