AMD Stock Fell in October despite Earnings Beat
AMD stock fell almost 14% in October 2017
US-based (SPY) semiconductor (SMH) company Advanced Micro Devices’ (AMD) stock price fell 14% in October 2017. In the trailing-five-day period, AMD stock fell more than 22%. AMD’s stock price fell more than 9% on October 27, 2017, and it fell 8% on October 30.
The company beat the analyst revenue estimate by $130.0 million and the EPS estimate by $0.02 in 3Q17. Why did AMD stock fall despite a revenue beat last quarter?
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Investors have doubts over long-term growth prospects
Investors and analysts have expressed concern over AMD’s long-term growth prospects. The stock has been on an upward spiral since 2016 when it rose almost 300%. In the trailing-12-month period, AMD has generated returns of more than 50% to investors.
However, investment bank Morgan Stanley (MS) cut the 12-month stock target on AMD from $11.00 to $8.00 and lowered its rating to “underweight” from “equal weight.”
Morgan Stanley doesn’t seem convinced of AMD’s ability to grow revenue from verticals such as cryptocurrency mining and video consoles, as well as offsetting the relative revenue decline from its core business segments.
Investors were disappointed as revenue gains in 3Q17 were driven by intellectual property revenues instead of revenues from the company’s core products.
Analysts expect AMD’s revenues to rise 21.0% year-over-year (or YoY) in 4Q17, 26.0% YoY in 1Q18, 18.4% YoY in fiscal 2017, and 17.0% YoY in fiscal 2018.