Investors had high hopes for Advanced Micro Devices (NASDAQ: AMD), so much so that the stock started the rally early. But a month later, AMD’s management forecast a lighter outlook than investors expected, sending the stock sharply lower. Despite the drop, AMD’s turnaround is progressing. More importantly, its inflection point is playing out due to the product refresh in servers, notebooks, and graphics cards.
AMD raised its revenue growth guidance to over 20%, up from the teens. In the third quarter, the company earned $0.10 a share, beating estimates by $0.02 a share. But the stock went south when management forecast sequential revenues falling 25%. It also forecast demand for cryptocurrency mining will moderate during the quarter. The outlook is conservative: crypto prices are soaring. AMD cannot precisely anticipate when prices and demand for its GPUs will fall.
The downbeat forecast resets the stock’s valuations to more reasonable levels. Looking ahead, AMD continues to push its Ryzen and Polaris products. On October 26, the company announced an all-important release for Ryzen. It will launch two mobile processors: Ryzen 5 2500U and Ryzen 7 2700U. This will put the company in competition with Intel’s (NASDAQ: INTC) U-series mobile chips.
Takeaway
AMD stock will trade with high volatility following the earnings report last week.
