Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) have fallen to $10 level now. Is it the right time to buy AMD stock?
There is no respite for Dr. Lisa Su led semiconductor company Advanced Micro Devices, Inc. (NASDAQ:AMD) shareholders as the stock continues its free fall even after better than expected third-quarter earnings. The recent bearish call from Morgan Stanley has only added to AMD stock's woes. AMD stock is down more than 24% since the earnings announcement. However, such massive swings are nothing new for AMD stock. It was in May when last AMD stock was trading at the $10 level that too after a post-earnings crash. The question now is, has AMD stock bottomed out yet? Is AMD stock an attractive bet at the $10 levels? Let's take a closer look.
A bottom might be just around the corner.
While some technical indicators do suggest a bottom in AMD stock is nearby, the correction in share price is yet to stop. AMD stock is heavily oversold as both the popular momentum indicators Relative Strength Index (RSI) and Bollinger Band suggests that the stock is in oversold territory. The current RSI reading stands at 25.91, well below the commonly used oversold threshold of 30. AMD share price has also breached the lower Bollinger Band, to suggest an oversold condition. Generally, the combination of the above two indicators is considered as a strong signal. Presently, AMD stock is trading at the $10 levels. This has been a strong support level in the last six months. Only in January 2017, AMD stock has fallen below the $10 level where lies the next support level at $9.75. Investors need to be wary as AMD stock might be very volatile going ahead. With a very strong support level just little over 7% below the last close, a bottom might be just around the corner.
A positive for AMD stock amidst the gloom.
The put/call ratio is generally used to assess the direction, a stock is headed in future, based on investor sentiment. This is where AMD stock has a positive amidst all the recent bearish calls. The put/call ratio of AMD stock as of November 1st is 0.59. If a put/call ratio value is less than 1 then it is considered as bullish investor sentiment, while a value greater than 1 indicates a bearish investor sentiment. As you can see from the chart below, the put/call ratio value has not gone up significantly after the recent massive crash remaining still below 1 and is heading downwards again. This could be treated as a positive signal and could be an indication that investors see limited downside in AMD stock from the present levels.
Tesla earnings call hints at a big positive for AMD.
While AMD stock lacks any major positive or catalyst at the time being to boost investor sentiment, yesterday's Elon Musk led Tesla Inc (NASDAQ:TSLA) earnings call seems to have something positive for AMD though it is just a speculation at the moment. Tesla presently uses AMD's rival NVIDIA's (NASDAQ:NVDA) GPU offerings for the hardware it uses for its Autopilot self-driving initiative. However, in the earnings call yesterday, Elon Musk suggested at a new direction for the company in the Autopilot hardware. A MarketWatch report hinted that AMD could be the beneficiary if Tesla goes ahead with its Autopilot hardware changes as it was earlier reported that the electric car manufacturer was working on its own chips with the help of AMD. Elon Musk has promised to disclose more on their strategy for self-driving hardware soon. If the earlier rumors were to hold true, this could be a big positive for AMD in the booming self-driving space where NVIDIA is the leader. NVDA stock also took a minor hit on account of this development.
It's really difficult to be sure that AMD stock might have a bottom in sight given AMD is AMD. However, in 2017 the $10 level has been a strong support level for AMD stock. It would make sense to think that AMD stock might bottom out at the $10 levels. Technicals also seem to fall in place for the stock, also suggesting the downside may be limited from the present levels. AMD stock could be headed for volatile times ahead. Conservative investors might want to approach the stock cautiously.
Also, a lot has been made about the bearish Morgan Stanley report on AMD's 2018 prospects but a recent ExtremeTech author Joel Hruska makes some valid point questioning the accuracy of the report. One of the principal arguments of Morgan Stanley analyst Joseph Moore was that AMD's 2018 fundamental outlook was not robust as GPU sales would deaccelerate due to waning cryptocurrency demand. Hruska providing the evidence writes "All of the evidence suggests Ryzen is driving AMD’s recovery much more so than Vega, particularly given GPUs have never been a major profit driver for the company outside of its design wins in the Xbox One and PS4. If Ryzen continues to ramp as strongly as it has, it should more than offset declines in cryptocurrency sales, especially as EPYC shipments begin." Things might not be that bad for AMD as expected to be.
Looking for better tech stocks than AMD to invest on basis of strong fundamentals? Then do check out Amigobulls' top stock picks, which have outperformed the NASDAQ by over 158%. Further, if you're in for top picks from the auto sector, you should also check out our top auto stock picks, which have beaten the S&P 500 by over 295%. if you are looking for daily technical trading ideas, do check out our daily technical trading ideas page.