AMD stock is hitting 52-week lows as it reports disappointing preliminary revenue results. Here’s when to buy the chipmaker’s shares.
Advanced Micro Devices (AMD) – Get Advanced Micro Devices Inc. Report finally slipped up, just as Nvidia (NVDA) – Get NVIDIA Corporation Report did a few months ago.
Shares of the veteran chipmaker are down 8% on Friday, but not because they’re following the broader market lower on a stronger-than-expected jobs report.
Aside from the implications that the data could have for the Federal Reserve and interest-rate increases, AMD is down for company-specific issues.
On Thursday after the close AMD reported its preliminary third-quarter revenue of $5.6 billion vs. estimates of $6.71 billion and a prior guide of roughly $6.7 billion.
Chief Executive Lisa Su said that “the PC market weakened significantly in the quarter,” but for semiconductor investors, that’s not too surprising.
That’s as Nvidia announced its preliminary fiscal Q2 results in early August as revenue of $6.7 billion was below consensus expectations of $8.1 billion, mainly due to a shortfall in gaming revenue.
When Nvidia reported its actual results on Aug. 24, guidance for the current quarter came in at $5.9 billion vs. estimates of $6.92 billion.
The fact that AMD wasn’t seeing this weakness was both surprising and impressive, but the demand problems appear to have caught up to it as well.
Trading AMD Stock
Weekly chart of AMD stock.
Chart courtesy of TrendSpider.com
It’s been a tough week for AMD stock, which now finds itself back below last week’s low and at 52-week lows.
It continues to linger around the 78.6% retracement, as measured from the all-time high down to the 2020 low.
If the shares can rally here on the news, it would be a bullish development that could put this week’s high and the 200-week moving average back in play near $70 to $71.
Above that puts prior range support in play near $74, along with the declining 10-week moving average. For now, we may assume the latter — the 10-week — is active resistance.
While that would be a positive short-term development, the risk is that the bullish reversal doesn’t last. That’s what we saw with Nvidia and its news in August.
With AMD struggling now, the bulls should keep an eye on the $59 to $60 area. If the shares revisit this key breakout area, it could be a buying opportunity for long-term investors.
While the tide is clearly not working in AMD’s favor at the moment, it’s been under pressure all year. At $60, the shares will be down 64% from the all-time high, and even with lower revisions surely on the way, the stock trades at just 15 to 16 times earnings.