Move over Intel Corporation (NASDAQ: INTC) and NVIDIA Corporation (NASDAQ: NVDA), small cap and often unloved chip stock Advanced Micro Devices, Inc (NYSE: AMD) has been seeing more action and perhaps more appreciation over the past few trading secessions. I should note that we previously had an open position in Advanced Micro Devices in our SmallCap Network Elite Opportunity (SCN EO) portfolio from roughly last summer up until late January when we locked in a small loss. Since it's a trading portfolio, we got out because shares sank once more after its latest earnings report - something they had already done after three previous earnings reports. But if you are an investor or trader with a longer term horizon one way or the other, you might want to consider the following news about AMD:
CEO Interview on CNBC. CEO Rory Read appeared on CNBC's Fast Money last Thursday to say that the company makes about 30% of its sales from selling chips into devices other than PCs – up from about 4% when he joined in 2011. He added:
"We used to be in the PC consumer segment, where every six months, you're running, you're running… On this one, what we're trying to do is create these long-term strategic relations, like we did with Xbox One and Microsoft, like we did with Sony. Those are the plays that are going to create the long-term transformation to AMD."
He noted that they are going into the commercial PC space where the lead times is much longer than the six months in consumer market.
Friday's Trading Action. On Friday, Advanced Micro Devices jumped more than 6% to briefly hit the $4 level on no apparent news beyond the Thursday CNBC interview. According to Schaeffer's Daily Option Blog, AMD calls were the options of choice as they were trading at seven times the average intraday pace and outpaced puts by a 10-to-1 margin while the most active strike was the July 4.50 call as 8,958 contracts traded.
Monday's Option Trading Action. Schaeffer's Daily Option Blog also noted that on Monday, put volume had soared to more than five times the typical intraday pace during the afternoon with the July 4 strike leading the pack as 12,000 contracts traded at an ask price of $0.51 apiece. The breakeven for these in-the-money puts is $3.49.
AMD as the Most Underappreciated 2014 Turnaround Story. On Monday, it was reported that Wedbush analyst Betsy Van Hees had reiterated an Outperform rating on AMD and went so far as to call it the "most underappreciated 2014 turnaround story." Specifically, she commented:
"We are incrementally more positive on AMD and believe it is the most under appreciated turnaround story in our universe following our well received investor meetings last week with SVP and CTO Mark Papermaster and Corporate VP of IR Ruth Cotter."
She also added:
"The PC market is changing and so is AMD who we believe during 2013 righted the ship through restructuring, impressive end market diversification, and flawless product executions positioning the "turnaround AMD" for strong Y/Y earnings and revenue growth in 2014. We reiterate our OUTPERFORM and recommend investors with a higher risk/reward tolerance continue to buy the stock. Our 12-month PT of $5 is based upon about 10x our 2015 pro forma EPS estimate of $0.37 plus $1.43 in cash per share."
Share Performance. On Monday, Advanced Micro Devices fell 3.54% to $3.81 plus the stock is down 1% since the start of the year, up 48.8% over the past year and up 78% over the past year. Here is a look at its long term performance verses that of Intel Corporation and NVIDIA Corporation:
Finally, here is a look at the latest technical charts for all three chip stocks:
Given all the above news, we can probably expect a very active trading week and maybe AMD will finally find some love and appreciation by investors.
SmallCap Network Elite Opportunity (SCN EO) has an open position in AMD. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.
No comments:
Post a Comment