With lack of new catalysts, Advanced Micro Devices, Inc. (NASDAQ:AMD) stock has come to standstill. Is AMD stock past its glory days?
After almost 3X returns in 2016, shares of Dr. Lisa Su led Advanced Micro Devices, Inc. (NASDAQ:AMD) have lost their way in 2017 with almost flat year-to-date gains. 2017 has been a rollercoaster ride for AMD stock with peaks as high as $15 and lows of $10 level. AMD stock has failed to bounce back strongly after the post-earnings sell-off. Shares of the Sunnyvale, California-based semiconductor company have been trading sideways since the second week of November. This brings us to the question, Is AMD stock still a good fit for high growth investors? Especially, when its GPU rival NVIDIA (NASDAQ:NVDA) stock is just going all guns blazing. Has AMD stock run out of steam?
AMD is making progress but not fast enough.
AMD stock crashed after reporting its third-quarter earnings which was one of its best earnings releases in recent times. The chipmaker had reported a beat on both, the top and the bottom line numbers along with improvement in its profit margins, both on yearly as well as sequential basis. Even the guidance was better than analyst expectations, the stock tanked because the guidance came in lower than the third quarter numbers. The massive run-up in AMD stock price has set the expectations very high. Now, with all the positive news priced in, the stock lacks new growth catalysts. Now, with NVIDIA and Intel (NASDAQ:INTC) also stepping up the ante, AMD stock continues to remain under pressure.
Just a few days back, a Firefox hardware survey had put AMD ahead of its main GPU rival NVIDIA with a GPU market share of 15% while NVIDIA at 14% and Intel in the lead at 65%. However, the latest GPU shipments result for Q3 2017 revealed by Jon Peddie Research states that NVIDIA increased its GPU market share by a very huge margin compared to AMD. NVIDIA registered a 29.5% shipments increase in GPUs compared to 7.6% shipments increase by AMD. AMD's computing and graphics segment did post strong results in the third quarter with revenue of $819 million, up 74% YoY and 24% Q0Q. However, this growth was largely driven by strong sales of Radeon GPUs and Ryzen CPUs as newly launched RX Vega GPUs have failed to live up to expectations.
The Jon Peddie Research report states that overall GPU shipments increased 9.3% compared to previous quarter driven by gaming and cryptocurrency. And, the report finds AMD's market share increase is largely due to demand from crypto mining which many analysts believe will fade soon. NVIDIA, in third quarter, had the largest GPU shipments compared to both Intel and AMD which doesn't bode well for AMD whose GPU market share fell marginally by 0.2.% in the same period.
NVIDIA could steal AMD's thunder during the holiday season.
The gaming segment was one of the major reasons behind NVIDIA's strong earnings performance. NVIDIA's gaming revenues which contributed 57.5% of its total revenue were boosted by the Nintendo tailwind. And, if a report from the NPD Group is anything to go by, "Nintendo is eating Sony and Microsoft’s lunch in the United States. The Nintendo Empire supposedly accounted for a stunning 66 percent of video game hardware sold in the US in October." This is not a good sign for AMD as it supplies GPUs for the consoles of Sony and Microsoft. To add to that, AMD's Enterprise, Embedded and Semi-Custom segment revenues, which accounts for the console GPU sales, were flat year-over-year. AMD CEO, Dr. Lisa Su commenting on the console business stated: "Our semi-custom business continues to perform as expected for the year and we anticipate seasonal demand to remain healthy as our customers enter the holiday sales cycle with Sony's PlayStation 4 Pro and Microsoft's Xbox One X." AMD has high expectations from the holiday season for its semi-custom business. However, a recent ExtremeTech post analysis suggests Nintendo could make a dent in Xbox and PlayStation sales this holiday season which is not good news for AMD.
AMD stock has struggled of late. Even the improvement in the technical set up has not got the stock going. The AMD stock technical chart saw a bullish Moving Average Convergence Divergence (MACD) indicator crossover on Friday last week, yet the stock closed in the red in yesterday's trade. Now, the stock is set for a bearish crossover as its long-term 200-day simple moving average (SMA) is poised to go past its shorter-term 100-day SMA from below. In technical parlance, a long-term SMA going past a shorter-term moving average is considered as a death cross, which is a strong bearish signal. Further, AMD stock is in for a resistance at its 20-day SMA now. To sum up, the technical setup for AMD stock is yet to turn bullish drastically. At the same time, AMD lacks any major growth catalysts as for the time being all seem to be priced in. The new product launches have been the major growth catalysts for AMD till now, with no new product launch till February 2018 at least, an immediate return to those old glory days seems difficult for AMD stock. AMD stock is likely to trade in a range bounded manner till next earnings in the absence of any surprises.
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