The second-quarter earnings season is in full swing, and two large-cap technology companies that fall into my NexGen style of investing reported their results this week. Both hit it out of the park.
Advanced Micro Devices, Inc. (NASDAQ:AMD) was up first, releasing its numbers after Tuesday’s closing bell. The company saw a profit of 2 cents per share, above the consensus estimate of breakeven for the quarter, and revenue grew 18.4% to $1.22 billion, coming in $60 million higher than expected.
AMD’s largest segment, computing and graphics, reported sales that increased an eye-opening 51% year over year and 24% quarter over quarter.
AMD stock climbed 4.6% on Wednesday, with the biggest catalyst coming from an increase in the company’s third-quarter revenue forecast. Management now expects 20%-26% growth, which was well above what the Street had been predicting.
From a technical perspective, the recent strength has AMD up against its highest level since 2007. It traded up to $15.65 yesterday — 10 cents above that high — before pulling back to close a few percentage points below it. That action is only one day in the making, but if AMD stock is unable to break out in the next week, there could be a pullback as it forms a double top.
Facebook Inc (NASDAQ:FB) was the other large-cap tech company to report. Its numbers came out after the closing bell on Wednesday and easily beat on both the top and bottom lines. Earnings grew 69% to $1.32 per share and were 19 cents ahead of the consensus, while revenue gained 44.7% to $9.32 billion and bested estimates by $120 million. Monthly active viewers surpassed the 2-billion milestone in the quarter, again showing great growth at 17%.
The mobile advertising segment continues to grow and now makes up 87% of total ad revenue versus 84% last year. A few years ago, it contributed nothing. It’s encouraging to see that FB has figured out how to monetize its business model, and that’s even more apparent in the increase in operating margin to 47% from 42%.
FB stock opened at a new all-time high on Thursday morning, and from a pure valuation and technical standpoint it should continue to climb higher in the months ahead.
Bottom Line for AMD and FB Stock
The tech sector remains one of my favorites in both the short and long term, mainly as a result of the earnings potential within it. It can be difficult to find strong double-digit growth in a nine-year-old bull market, but it’s clear that these two big-name companies are still providing it to investors.
I don’t think it’s a coincidence, either, that the majority of the high-growth stocks — like AMD and FB — I find in my daily scans are in the tech industry. As a result, I expect this group to continue leading both the overall market and the NASDAQ to all-time highs.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.