To The Moon

$Advanced Micro Devices(AMD)$ will be releasing its third quarter earnings after market close on next Tuesday (29 Oct).

We have seen two semiconductor stocks $Lam Research(LRCX)$ and $Western Digital(WDC)$ reporting positive earnings which helped drive their stock price higher. So how would AMD stock price be performing after the earnings report on 29 Oct?

Market is expecting AMD to post earnings of $0.92 per share for the third quarter. Analysts say AMD could benefit from Intel's recent woes. Intel stock has plummeted this year on competitive and operational concerns.

Can AMD Stay Ahead Of Intel In CPUs Chips?

Under AMD CEO Lisa’s supervision, AMD jumped ahead of Intel in making CPUs at smaller node sizes, giving its products an edge in speed and performance. AMD is now making chips at 3-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.

Chip foundry $Taiwan Semiconductor Manufacturing(TSM)$ produces AMD's chips. The situation has helped AMD take market share from Intel in PCs and servers. It has helped to power AMD stock price.

AMD now is focused on making chips for artificial intelligence applications, a market where Nvidia leads. Analysts say AMD benefits from providing customers with an alternative to Nvidia.

In the second quarter, AMD took market share from Intel in CPUs for PCs as well as servers, according to Mercury Research.

AMD's unit share of PC processor sales was 21.1% in the second quarter, up from 17.3% in the year-earlier period. Its desktop PC processor market share was 23%, vs. 19.4% in the same quarter last year. Its notebook PC processor share was 20.3% in Q2, vs. 16.5% in the year-ago quarter.

AMD's unit share of the server CPU market rose to 24.1% in the second quarter from 18.6% in the year-earlier period.

Can AMD AI Chips Helped Its Earnings

Near the end of 2023, AMD launched its Instinct MI300 accelerators and processors for data centers. Those systems for high-performance computing and AI applications compete with Nvidia's H100 series devices. AMD stock dropped 1.3% on the day of its "Advancing AI" event. But the next day, Dec. 7, shares rocketed nearly 10%.

However, Nvidia leapfrogged AMD with its latest AI processors, which it announced on 18 March 2024. Those processors, the Blackwell series GPUs, will be available in late 2024. AMD stock retreated on the news.

But AMD stock popped higher on 17 May on a report that Microsoft (MSFT) plans to offer its Azure cloud computing customers a platform of AMD artificial intelligence chips as an alternative to systems running Nvidia chips.

On 02 June at the Computex trade show, Su announced that AMD is moving to an annual cadence for its Instinct AI accelerators. After the current MI300, it will deliver the MI325X later this year, MI350 in 2025 and MI400 in 2026.

At Computex, Su also updated the company's processor roadmap for notebook and desktop PCs. That includes the nascent category of high-end personal computers called AI PCs.

On 10 Oct, AMD held its latest "Advancing AI" event. The chipmaker discussed its AMD Instinct MI325X AI accelerators and next-generation networking solutions. It also launched its fifth-generation Epyc server central processing units and Ryzen AI Pro 300 Series PC processors.

So far, we have not seen much significant upside trading on AMD stock price.

AMD Looks Expensive On Valuation

Compared to its peers, AMD looks more expensive in its valuation. As of Thursday's market close, AMD's stock was trading at a forward P/E ratio of 28.16, a multiple higher than that of other AI-related stocks, including: Intel at 20.46 times.

Relative Strength (RS) Rating At A Concern Level Before Earnings

If we were to look at the relative strength which track the stock performance over one year period, it is at a level of 59, which does not signal positive or give investors confidence.

Level of 80 and above would mean an upward sentiment for the stock, so it might be better for us to monitor the price action of AMD today (25 Oct) and on Monday (28 Oct).

AMD have not been benefitting from the recent semiconductor names earnings surge.

Advanced Micro Devices (AMD) Price Target

Based on 31 Wall Street analysts offering 12 month price targets for Advanced Micro Devices in the last 3 months. The average price target is $188.96 with a high forecast of $220.00 and a low forecast of $150.00. The average price target represents a 23.15% change from the last price of $153.44.

If we looked at how AMD stock price have moved before and after its earnings, we have seen a positive move after the second quarter result, but we have a big decline in the first quarter 2024 earnings post result.

If we were to look back at the guidance given by AMD for second quarter versus actual, the revenue came in only $0.1 billion better ($5.7 billion vs $5,8 billion). Gross margin was spot on, so we might want to look at the guidance for third quarter, for the third quarter of 2024, AMD expects revenue to be approximately $6.7 billion, plus or minus $300 million.

At the mid-point of the revenue range, this represents year-over-year growth of approximately 16% and sequential growth of approximately 15%. Non-GAAP gross margin is expected to be approximately 53.5%.

Technical Analysis - MACD and Multi-timeframe

If we looked at the technical for AMD, MACD is giving a bearish downside, due to the recent decline in stock price from 09 Oct high of around $173, AMD is currently trade below the short-term MA but above the long-term MA, and MTF is giving an uptrend on average.

AMD need to show some strength when market is giving positive bias, we will need to see if AMD can trade above the $157 level if we want to see a price surge after AMD earnings on 29 Oct.

This might present a good opportunity to buy. I am holding my position as I believe AMD could have the strength to move into the $170 ish.

Summary

If we were to look at how AMD have been trading before earnings, it does give us a pattern, and we also need to consider the strength of the market and sector, I believe the WDC positive earnings could help to move the semiconductor sector higher today (25 Oct).

So this might be a good chance to buy into AMD to catch any upside move post earnings for AMD.

Appreciate if you could share your thoughts in the comment section whether you think AMD could create a price surge after its earnings result on 29 Oct.

@TigerStars @Daily_Discussion @Tiger_Earnings @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.