Trade AMD and never underestimate Lisa Su

Advanced Micro Devices (AMD) released earnings that disappointed less than two weeks ago. The third quarter had been a tough one for the entire semiconductor space. Expectations had already been ignited.

However, the company, a longtime favorite of Sarge, failed to even meet that reduced level. Revenue grew 29% year-over-year, which is pretty decent for most companies. For AMD, this was the slowest pace of sales growth, by a country mile, since the second quarter of 2020. Earnings fell 8%. This from a company that had experienced several quarters of triple-digit growth in the past few years and had increased earnings by 67% the previous quarter.

The company had been forced to accept a $ 160 million charge for inventory adjustments and discounts across various lines of business. Sales for the current quarter were driven towards growth of just 14%. The title suffered. Wall Street had forgotten who runs this store. When I make my favorite CEO lists, meaning I’d be willing to invest in a stock based solely on who the CEO is, AMD’s Lisa Su makes that cut (and it’s an elite cut) every time.

Wall Street took note of new AMD products designed to maximize performance and win even more market share from competitors. The recently announced launch of the company’s fourth-generation EPYC processor known as Genoa has certainly gained industry attention. Wall Street is in line to get up and say hello.

Love is in the air

It started last week. Five-star analyst Stifel Nicolaus (from TipRanks) Ruben Roy reiterated his “buy” rating on AMD and its $ 91 target price. Roy wrote that he sees both the new Genoa and Milan chips existing in different workloads and the company’s expanded portfolio driving greater market share. On the same day, Goldman Sachs’ Toshiya Hari (also five stars at TipRanks) reiterated his “buy” rating and target price of $ 74 (the stock was already there this morning) after the launch in Genoa.

Hari wrote: “The event reinforced our view that the Genoa launch will not only catalyze further short-term gains in both the cloud and on-premise enterprises, but will also solidify the company’s status as a reliable and predictable partner. of innovative computing solutions in the data center industry, likely positioning AMD for sustained momentum beyond this new generation of processors. “

Flash forward to this morning. UBS five-star analyst Timothy Arcuri upgraded AMD to “buy” from “neutral,” while raising its target price from $ 75 to $ 95. Almost simultaneously, Robert W. Baird upgraded AMD to a “buy” from “hold” rating and raised its target price to $ 100 from $ 65.

Gerra wrote: “Supply chain checks highlight a strong reception of Genoa by data center OEMs, who are shifting significant resources to support AMD. Genoa’s significant performance increase should translate into accelerated earnings of market share for AMD in 2023, along with a significant increase in higher prices and a higher gross margin profile, strengthening AMD’s EPYC performance leadership in the years to come. “

My thoughts

I wrote to you after earnings less than two weeks ago and told you that I was in no rush to reduce my long position, nor to increase it at the time. I suggested writing on December 16th $ 50 put for $ 1.00. Those puts are trading at $ 0.24 this morning. The new processor is expected to strengthen the data center which, in terms of segment performance for the third quarter, increased sales by 45.2% and operating profit by 64%.

This means that AMD is not resting on its laurels and is protecting itself as well as building where it is strongest. Never underestimate Lisa Su. Never.

Gaming and Client segments will need time to fully recover. Embedded is not quite what the company acquired with the Xilinx deal. Refusing to grant company leadership in the data center was / is critical at least until these other companies recover and contribute more energetically to the whole.

This stock continues to color within the lines, which I have already reported to readers. From earnings, AMD resumed both its 21-day EMA and its 50-day EMA. This prompts portfolio managers to increase exposure on the long side.

When the stock price reaches the upper trend line of the regression model, that line could be running at the stock’s 200-day SMA, which could create an epic showdown that could result in strong resistance or something. along the lines of a “catapult” effect. Taking the 200-day line would force some unexposed portfolio managers to open new long positions.

Relative strength is moving right without yet seeming technically overbought. The daily MACD is in much better shape now, with the 12-day EMA above the 26-day EMA, as the 9-day EMA histogram appears to be the most positive since the beginning of August. Taking the 26-day EMA into positive territory would be the first “next” step.

Advanced microdevices

– Target Price: $ 104

– Pivot: $ 90 (200-day SMA)

– Add: $ 67 (50-day SMA)

– Panic: $ 63 (break of the 21-day EMA)

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