To The Moon

$Advanced Micro Devices(AMD)$ is scheduled to deliver its third quarter update after market close on 31 Oct (Tuesday) at 4:15PM ET.

Advanced Micro Devices will suffer a challenging week ahead, as its upcoming earnings report will show a sharp slowdown in both profit and sales growth because of a weak PC market.

Though there is only a 7% decline in global PC shipments in Q3 2023, which is the smallest contraction. AMD market share compared to Intel is significantly lower in Overall x86 CPU share.

We have seen Intel making a pretty impressive growth in its Q3 earnings as the PC market demand and inventory levels continued to improve sequentially.

Question now is did AMD manage to catch up in term of CPU demand on top of the GPU cards?

Advanced Micro Devices (AMD) EPS History and Current Estimate for Q3

Market is expecting to see $0.68 for earning per share for this Q3 reporting, this is up a fraction compared to $0.67 same period one year ago. This would mark AMD’s five times consecutive quarter of declining earnings for a year-on-year basis.

Meanwhile, revenue is expected to inch up 2% annually to $5.69 billion, reflecting softening demand for PC and server chips.

I would be expecting AMD’s management to provide a cautious forward guidance given the potential for slower near-term data center demand and a sluggish PC market.

Advanced Micro Devices (AMD) Option Implied Move

Traders and investors are expecting a possible implied move of about 9% in either direction in the options market. This would mean a sizable swing in AMD shares.

In the last quarter reporting in early August, AMD shares declines by 4.4% after.

The options market overestimated AMD stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±7.4% on average vs an average of the actual earnings moves of 6.3% (in absolute terms).

Advanced Micro Devices (AMD) Option Open Interest and Implied Volatility

AMD's last earnings implied volatility (IV30) going into earnings was 53.7. The last time AMD released earnings, the implied volatility dropped to 45.2, resulting in an implied volatility crush of 16%. 5 days after earnings, the 30 day IV was 44.4.

You can compare how AMD implied volatility changed around earnings for the last 12 quarters.

Average Implied Volatility Crush For AMD Earnings:12%

Average 30 Day Implied Volatility 1 Day Before Earnings:54.6

Average AMD 30 Day IV for the Day of Earnings:48.1

Average 30 Day Implied Volatility 5 Days After Earnings:49.7

AMD has a total open interest of 152,978 contracts and a put-call ratio of 0.68 for options expiring Nov 03, 2023 (3 days).

The option open interest in AMD climbed -5.0% to 2.9 million contracts. The current open interest is above its 52-week average of 2.9 million contracts. Currently, the OI percentile rank is 50.2%. So, AMD had a higher OI 49.8% of the days in the last year. The most notable increase was in the 03-Nov-23 expiration which added +35,262 contracts.

AMD Call Open Interest

The open interest in AMD call options decreased by -7.0% to 1.4 million contracts. However, call open interest is up 2.4% in the last 5 days. Compared to its 52-week average of 1.5 million contracts, the current call open interest for AMD is weaker than usual.

AMD Put Open Interest

The open interest in AMD put options dropped by -2.9% to 1.5 million contracts. However, put open interest has risen 3.2% in the last 5 days. Compared to its 52-week average of 1.4 million contracts, the current put open interest for AMD is higher than usual.

AMD Put/Call Ratio (Open Interest): In the last 5 days, the put/call ratio for AMD increased by 0.8% to 1.0.

Summary

Looking at the past several near-term headwinds AMD faces in the midst of the current environment, market analysts have cut their EPS estimates 28 times in 3 months leading up to date. Yet there is only 3 upward revisions so far.

AMD competes with Intel in making central processing units (CPUs) for personal computers and servers. It also rivals Nvidia in the market for graphics processing units (GPUs) for PCs, gaming consoles and data centers.

AMD stock had dropped to a near six-month low of $93.11 on 29 Oct (last Thursday), before closing yesterday at $96.18. At its current valuation, AMD has a market cap of $155.8 billion. Shares are down 27.4% from their 2023 high of $133 reached in mid-June, though still up nearly 49% on the year.

In comparison, Nvidia is up 177% year-to-date, Intel has gained 34.5%, while AMD has only gained about 28%.

I would be expecting some volatility in the price movement, as AMD revenue on the PC segment is one concern, followed by its guidance for rest of 2023.

Appreciate if you could share your thoughts in the comment section whether you think AMD share price would expect a volatile move today (31 Oct).

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.