Price action for Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is not tied to reality right now. And I don’t mean that it the way that you might think. AMD stock is currently trading at the whims of ethereum speculators, which is not a reflection of the company’s true potential.
But that should change in two weeks’ time.
Ethereum has been hit hard this week. The cryptocurrency has traded sharply lower over the past two days, and was down more than 2% early Friday morning. The problem for Advanced Micro is that it’s GPU processors have become quite popular with ethereum blockchain miners, and that hype has spread into AMD’s price action.
But Advanced Micro Devices is so much more than an ethereum mining tool, and that’s what has me optimistic and ready to deliver a pair of trade ideas in just a moment.
The company’s new GPUs are going head to head with rival Nvidia Corporation’s (NASDAQ:NVDA) and winning in price and performance. Meanwhile, AMD is stealing marketshare from semiconductor giant Intel Corporation (NASDAQ:INTC) on multiple fronts, with Epyc outperforming Intel Broadwell server chips and Ryzen is grabbing market share from Intel’s Core PC lineup.
Click to Enlarge So, while cryptocurrency may be creating some hype for Advanced Mico right now, it’s not the company’s core product line, nor is it the main reason you should own AMD stock. It’s a flash in the pan, and any dips in the shares due to ethereum are definitely buying opportunities.
Advanced Micro Devices will get the chance to remind investors of that fact later this month when it releases its quarterly earnings performance. The report is due out on July 25, and Wall Street is looking for a loss of a penny per share, up from a loss of 5 cents per share last year. Revenue is expected to rise 14.5% to $1.16 billion.
EarningsWihpsers.com, meanwhile, places the whisper number at a profit of a penny per share, which would be a coup for the bulls.
But while earnings expectations are on the elevated side, the rest of the sentiment backdrop remains bearish.
Options Pits and Sentiment
For instance, Thomson/First Call data reveals that 20 of the 30 analysts following AMD stock rate the shares a “hold” or worse. Shares are also trading north of their 12-month consensus price target of $12.85. Earnings should be more than enough to convince these holdouts to finally jump on the bandwagon.
Elsewhere, short sellers are already abandoning ship. During the most recent reporting period, the number of shares sold short dove by 7% to 145 million. That still represents more than 17% of Advanced Micro Devices’ total float, which could fuel a considerable short-covering rally on a breakout.