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Why AMD fell despite price upgrades from JPMorgan, Barclays and more

The US semiconductor firm’s shares were unable to push higher this week, despite its latest earnings surpassing analysts’ predictions.

  • Advanced Micro Devices (NASDAQ: AMD) has seen its share price drop by nearly 8% since reporting better-than-expected Q4 earnings
  • The decline coincided with rising concerns over new Covid-19 variants and a slow roll-out of vaccines globally
  • JPMorgan, Barclays, Mizuho, Craig-Hallum and Northland analysts all raised their price targets following AMD’s results
  • They also maintained their ‘buy’ calls on the stock
  • Trade AMD, long or short, with an IG account today

AMD stock price: what’s the latest?

Advanced Micro Devices’ share price is down nearly 8% since the company reported its fourth quarter and full year earnings for fiscal 2020 on Tuesday (26 January 2021).

Shares closed at US$94.71 each on Tuesday, but have since waivered, eventually closing at US$87.52 each on Thursday (28 January), a drop of 7.6%.

This is despite the fact that Q4 earnings beat Wall Street estimates. The decline also coincided with sell-off signals triggered by rising concerns over new Covid-19 variants and a slow roll-out of vaccines globally.

The AMD stock is down 3.4% across the whole month of January 2021.

AMD’s Q4 sales and EPS surpassed analyst predictions

The PC chip manufacturer reported a revenue of US$3.24 billion in Q4 2020, which is up 53% year-over-year and 16% quarter-over-quarter.

It attributed the revenue increase to the Computing and Graphics segment and the Enterprise, Embedded and SemiCustom segment.

Non-GAAP diluted earnings per share (EPS) was US$0.52 compared to US$0.32 a year ago and US$0.41 in the prior quarter. This is compared to analysts’ earlier prediction of US$0.47 a share on sales of US$3.02 billion.

Operating income came in at US$570 million compared to US$348 million a year ago and operating income of US$449 million in the prior quarter. Operating income improvements were primarily driven by revenue growth, AMD said.

Meanwhile, net income was US$1.78 billion, including an income tax benefit of US$1.3 billion associated with a valuation allowance release, as compared to US$170 million a year ago and US$390 million in the prior quarter.

What is AMD’s sales and share price outlook?

Looking ahead,AMD expects revenue to be approximately US$3.2 billion for the first quarter of fiscal 2021, plus or minus US$100 million, an increase of approximately 79% year-over-year and down 1% sequentially.

The year-over-year increase, the company added in the press release, is expected to be driven by growth in all businesses.

Following AMD’s latest earnings, many Wall Street firms raised their price targets.

JPMorgan raised its price estimate to US$100 from US$86 while keeping a ‘neutral’ rating, citing AMD’s strong client server and semi-custom demand outlook. However, it noted that supply constraints could restrict the company’s near-term growth prospects.

Meanwhile, Craig-Hallum raised its price target to US$120 from US$100, Northland to US$84 from US$75, Barclays to US$120 from US$115, and Mizuho from US$105 from US$102. All four firms maintained their ‘buy’ calls on the AMD stock.

On the flipside, Citi analysts were more bearish, raising the firm's price target on AMD to US$17 from US$13, but keeping a ‘sell’ rating on the shares due to its overvaluation.

How to trade AMD shares with IG

Are you feeling bullish or bearish on AMD’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Advanced Micro Devices> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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