There has been a lot of developments in $AMD - Advanced Micro Devices stock, since I last covered them on June 21st. My previous coverage was my initial coverage of their company, and gives an outline of their whole company, financials, and other important information, which can be found here. However, this analysis is not going to repeat this, rather it is designed to update you with recent news, events, and SEC filings to stay up to date on AMD's stock.
Recently, there have only been 2 noteworthy SEC filings, which are:
Current Report (8-K):
On October 26, 2020. AMD entered into a merger plan with Xilinx Inc. to make Xilinx a subsidiary of AMD. This merger proposal was officially passed by the UK Competition and Markets Authority on June 29th, making Xilinx an official subsidiary of AMD.
Quarterly Report (10-Q):
On July 27th 2021, AMD released their Q2 2021 financial results. Overall AMD beat their earnings estimates by over 16%, and they raised their guidance. Both of these factors are bullish and assisted in AMD closing 7.5% higher on the trading day following this earnings release.
The most important factors from this report were that AMD increased revenues 100% YoY (12% QoQ), increased their gross margin by 4 percentage points YoY (2 percentage points QoQ), had a massive increase in their operating incomes and net incomes both YoY and QoQ, and lastly, they announces a $4B share repurchase program.
Windows 11 Updates:
Recently, Windows 11 has released an update which has slowed the performance of AMD's CPU's. AMD is looking into their slower performance with this update and said that they are aiming to fix this problem by the end of the month (October 31st 2021). However, if these problems persist, many people may switch over to another brand of CPU's (ie. Intel). This will not only cost AMD revenues, but it will be giving those revenues to AMD's direct competitors.
AMD Stock Performance:
Overall, AMD has performed very well since my coverage and is up nearly 50% since my post. There have been a lot of catalysts over this time frame that have led AMD to have sustained such large growth over the past 4 months. Firstly, AMD beat earnings and raised their guidance, which immediately boosted the stock 7.5%. Furthermore, AMD has gained partnerships with elite companies including Tesla and Google.
Q3 2021 Earnings:
AMD is reporting their earnings today (October 26, 2021) after market close. This is sure to be a catalyst for movement in their stock. In the next section I will give my earnings estimate and how I would play it.
I am trying to get this out quickly, so I do not have time to take you through my reasoning for my earnings predictions.
I think that AMD will report quarterly revenues of $4.4B, which is 7% higher than AMD guidance suggested, and 7% higher than the average analyst earnings estimate of $4.12B. I think that the growth in their revenues will be the cause of a large growth in their data center revenues.
I believe that AMD's EPS (based on my revenue projection) will be $0.72/share, which would indicate an earnings beat of 7.5%.
Overall, I think that AMD is going to beat earnings, but by a relatively small margin. However, it is difficult to predict how the market will react to this. As a result of this, I am taking a more neutral and safe approach through a bull call spread of 126/132. This would cap your losses at $174/bull call spread, and yield a max gain of $426/bull-call spread.