After a week that saw investors bailing on it, Advanced Micro Devices (NASDAQ:AMD) started this week off on better footing, with AMD stock getting a 1% bump.
With no major headlines that would have impacted the technology sector or tech stocks, what was behind the gain?
Why Did AMD Stock Get a Monday Bump?
AMD stock closed off a week-long slide last Friday at $32.51. By the time trading wrapped up on Monday it was at $32.85, for a 1.05% gain. That was better than the Nasdaq Composite, which was up 0.71% on the day. Is there a reason why AMD reversed its decline?
Investors who were spooked last week are feeling a little more confident in AMD’s prospects. Positive reviews about AMD’s latest Ryzen PC processors and Radeon 5700 graphics cards are undoubtedly helping as well.
With AMD stock up nearly 85% on the year, there is some concern that the growth has been too high and too fast. Those flames were fanned last week when Mizuho Securities downgraded Advanced Micro Devices stock from “Buy” to “Neutral.” The firm is concerned that the impressive rally so far in this year means that there isn’t much room for upside in the stock.
Monday’s 1% gain likely signals that investors are returning to cautious optimism about AMD’s prospects. I say “cautious” optimism, because AMD’s primary competitors actually outperformed it on Monday. On the computer processor front, Intel (NASDAQ:INTC) got a 2.15% pop yesterday, while AMD’s graphics card competition Nvidia (NASDAQ:NVDA) saw a 1.71% gain.
Looking Ahead to AMD Earnings
AMD is expected to report earnings after the market closes on July 30. Analysts are looking for EPS of 8 cents, which would be down from the 13 cents the company delivered last year.
In Q1 2019, AMD beat analyst expectations, delivering EPS of 6 cents instead of the predicted 5 cents. Revenue was down 23% compared to the previous year, at $1.27 billion. The company also released guidance for Q2 earnings that suggested the company expects its financial performance — which has been effected by the collapse of cryptocurrency mining sales and the trade war with China — to improve. Revenue would still be shrinking year-over-year, but at a reduced rate.
“For the second quarter of 2019, AMD expects revenue to be approximately $1.52 billion, plus or minus $50 million, an increase of approximately 19 percent sequentially and a decrease of approximately 13 percent year-over-year. The sequential increase is expected to be driven by growth across all businesses. The year-over-year decrease is expected to be primarily driven by lower graphics channel sales, negligible blockchain-related GPU revenue and lower semi-custom revenue.”
Despite the earnings beat, AMD stock lost nearly 3% on the day after its Q1 earnings report. There’s a possibility that AMD could deliver some better than expected news at the end of July, including positive guidance based on sales of its newly launched products. That could boost AMD stock.
As InvestorPlace contributor Brett Kenwell notes, despite downgrading Advanced Micro Devices, Mizuho Securities actually raised its price target to $37. There is also a good chance that the market will react to another quarter that’s down compared to 2018 with a loss, as it did after the Q1 earnings report.
Monday’s 1% improvement in the AMD stock price is certainly a better outcome than the 5.4% slide it saw from last Monday’s close to Friday’s close. However, with AMD’s Q2 earnings report just a week away, don’t be surprised if there’s a little volatility in the AMD stock price. Investors will waffle between optimism and concern that the 2019 rally has run its course.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
