Advanced Micro Devices Stock Takes a Breather After Weak Guidance

AMD's Q3 revenue forecast fell short of expectations

Managing Editor
Jul 31, 2019 at 10:02 AM
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The semiconductor sector is in focus this morning, after Advanced Micro Devices, Inc. (NASDAQ:AMD) reported second-quarter earnings last night. While the chip name's earnings and revenue were in-line with expectations, its third-quarter guidance of $1.80 billion came in lower than the $1.95 billion expected due to lower demand for chips used for gaming. 

Analysts have rushed to chime in on the stock. Three brokerages have issued price-target hikes, the highest coming from Jefferies to $40 from $34, who noted that AMD has been executing its product cycle. However, Craig-Hallum cut its rating on the chip stock to "hold" from "buy," and Mizuho trimmed its price target to $36 from $37, citing competitive pricing from Intel (INTC). 

At last check, Advanced Micro Devices stock is down 8% to trade at $31.17, on track for its worst single-session drop since Jan. 28. AMD still boasts a 77% lead in 2019 though, and nabbed a 13-month peak of $34.86 on July 16. However, today's pullback appears to have breached support at its 50-day moving average, a trendline that caught a June pullback.

Echoing today, analyst sentiment is pretty evenly skewed. Of the 20 brokerages covering AMD, 11 rate it a "hold," and nine rate it a "buy" or better. Plus, the security's consensus 12-month price target of $32.39 is a discount to last night's closing perch of $33.87. 

Meanwhile, AMD has had a tendency to make bigger moves than what options were pricing in over the past year. This is per the stock's Schaeffer's Volatility Scorecard (SVS) reading of 85 out of 100, meaning buying premiums on the stock has been an attractive strategy for options traders.

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