Record Data Center Sales Send AMD Stock Soaring

There was plenty of skepticism priced into AMD stock before earnings

Jan 30, 2019 at 10:15 AM
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Advanced Micro Devices, Inc. (NASDAQ:AMD) reported fourth-quarter adjusted profit of 8 cents per share -- in line with estimates -- while revenue of $1.42 billion fell just short of the forecast. However, the chipmaker said data center sales surged 8.5% in the three-month period to a record $986 million, and upped its 2019 revenue guidance above the consensus estimate -- sending AMD stock up 9.7% to trade at $21.12.

Analysts were quick to weigh in on Advanced Micro Devices earnings. At least four brokerages have raised their AMD price targets -- including Cowen to $28, saying guidance implies a second-half rebound -- while Mizuho cut its target price to $28 from $30, still a 45.4% premium to last night's close at $19.25.

More analysts could be encouraged to adjust their ratings on the tech stock, too, should today's post-earnings price action continue. While half of the 22 brokerages covering AMD maintain a "hold" or "strong sell" rating, the average 12-month price target of $24.09 is within striking distance of the equity's current perch.

Today's bull gap is likely catching bearish traders off guard. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMD's 10-day put/call volume ratio of 0.67 ranks in the 72nd annual percentile, meaning puts have been bought to open relative to calls at an accelerated clip. Plus, almost 14% of the security's available float is dedicated to short interest.

Since its Dec. 26 bottom just above $16.03, AMD stock has rallied 31.8% atop a trendline connecting higher lows. Additionally, yesterday's pre-earnings retreat was contained by Advanced Micro Devices's 200-day moving average, which cushioned pullbacks in October and November. Year-over-year, the chip stock has tacked on roughly 54%, and has been one of the best stocks to own after Fed day since 2015.


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