Advanced Micro Devices Inc (AMD)

[bobs10]

What’s going on

And I don’t mean the 70’s song by Marvin Gaye? Well, as you might guess I have my own ideas.

The extreme volatility of AMD stock supports the idea that the market views AMD as a Roman candle. That is, when times are good the company burns bright as a star, but the rest of the time it’s one step away from the morgue. Ergo, when times are good, as they are now, then AMD earnings should be great. I know q1 earnings beat analysts estimates by a ton, but evidently the market was expecting much more, probably in the $.20 to $.30 range. Extrapolating further, from the markets view, since earnings haven’t been that good when times were good, it probably means that AMD has peaked and will soon be returning to its’ usual imitation of the walking dead.

This is one reason why I don’t expect the price of the stock to go up much even though I expect AMD to earn in the $.20 range this quarter. In fact with anything less than $.30 in earnings the stock will probably stay below $18, but macro events will probably have more to do with AMD’s price than anything AMD does. All super earnings do is let AMD into the game, the SOXX has to cooperate also.

Anyway the market view I expressed is of the “Old AMD”. Most of us could easily list 20 things that are different between the “Old AMD” and the “New AMD”, but it’s going to take time before the market understands “Promise Less and Deliver More”. If I’m correct what Hector is asking the market to do is value AMD the same way it values INTC. That’s something that’s only going to happen after a long period of sustained earnings.

In the meantime, as far as the market is concerned, it’s a “show me the meat” thing. The SOXX will continue to play a much more important role in AMD’s stock pricing than anything AMD does. The only thing that would alter this scenario is earnings the market considers truly exceptional. Otherwise it’s going to be a long time before AMD gets out of the dog house (K9?). Steadily improving earnings will improve the perception of AMD, but without exceptional earnings the price won’t jump the way some expect.