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Could AMD’s Q4 Earnings Report Boost Its Stock?

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Advanced Micro Devices (NYSE:AMD) is scheduled to report its fourth-quarter earnings results on January 28 after the market bell. The stock rose 2.33% on January 17 and closed the trading session at $50.93. Notably, the stock was trading 0.2% below its 52-week high of $51.05 and 167.35% above its 52-week low of $19.05. At the closing price on January 17, AMD had a market capitalization of $56.72 billion.

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AMD stock has gained 151.51% in the last 12 months. In comparison, the S&P 500 Index has risen by 24.7%. Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA) have gained 22.96% and 64.30%, respectively, in the last 12 months. Other chip stocks including Micron (NASDAQ:MU), Qualcomm, and Broadcom (NASDAQ:AVGO) have returned 70.19%, 75.11%, and 20.94%, respectively.

AMD’s fourth-quarter and 2019 expectations

AMD expects its revenues to grow by around 48% YoY (year-over-year) to $2.1 billion in the fourth quarter. The company expects its gross margin to be about 44% in the fourth quarter, which is higher than 43.25% in the third quarter. The company’s operating expenses will likely grow by around 13% YoY to $535 million in the fourth quarter. AMD also expects to generate positive free cash flows in the fourth quarter.

Wall Street analysts expect AMD to post sales of $2.11 billion in the fourth quarter—a rise of 48.5% YoY compared to $1.42 billion in the fourth quarter of 2018. Also, analysts expect the company’s adjusted EPS to rise by 287.5% YoY to $0.31 in the fourth quarter.

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Analysts expect AMD’s revenues to rise by 3.7% in 2019 to $6.71 billion. The sales will likely rise by 27.8% in 2020 to $8.58 billion. The adjusted earnings are also expected to rise by around 34.8% in 2019 to $0.62 per share. However, the profits are expected to rise by 80.6% YoY to $1.12 per share in 2020.

Analysts’ recommendations and target price

Among the 40 analysts tracking AMD stock, 16 recommend a “buy” rating, 22 recommend a “hold” rating, and two recommend a “sell” rating.

Currently, analysts have a 12-month target price of $41.99 on AMD stock. On January 17, the stock was trading at a premium of 17.6% to analysts’ 12-month target price. The median target price was $40.00 on the same date.

On January 20, Deutsche Bank analyst Ross Seymore maintained his “hold” rating on AMD stock and raised his price estimate to $40 from $29. The revised target price implies a 2.1% downside for the stock. According to TheFly, “Seymore expects AMD to guide to very strong 2020 growth of 27% when reporting Q4 results on January 28. However, while the analyst’s analysis yields upside to his revenue and earnings estimates, he continues to believe much of this upside is already reflected in AMD’s share price following the stock’s 60% rise over the past three months.”

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Today, Cowen and Company analyst Matthew Ramsay maintained his “outperform” rating on the stock and raised his price estimate to $60 from $47. The revised target price implies a 17.8% upside for the stock. According to TheFly, Ramsay “still sees a sizable upside to Street estimates driven by share gains across server/DT/NB markets and an under-model console cycle.”

Technical level

Based on the closing price on January 17, the stock was trading 7.4% above its 20-day moving average of $47.43. The stock is also trading 19.6% above its 50-day moving average of $42.57 and 38.8% above its 100-day moving average of $36.70.

AMD’s 14-day RSI (relative strength index) score is 74. The score denotes that the stock is overbought. AMD’s upper, middle, and lower Bollinger Band levels are $51.31, $47.43, and $43.56, respectively. On January 17, the stock closed near its upper Bollinger Band level, which indicated that it’s overbought.

Read Can AMD Stock Rally more on Analysts’ Upgrades?, AMD Ryzen Mobile 4000 CPUs Ready to Take On Intel, and Could AMD Stock Rally Again after Hitting New Highs? to learn more.

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