Advanced Micro Devices (AMD) is one of the top global household names in the semiconductor industry. AMD’s main product line includes the microprocessors, motherboard chipsets and graphical server processors that run the world’s computers and gaming systems. For Q2 2016, AMD had revenue of $1.027 billion.
On April 21, 2016, the AMD stock price was at $2.62 – about where it had been for much of the year. Then suddenly, the stock shot up on news of a potential Chinese deal. AMD is at $7.62 for August 19, 2016 – is the stock a buy, hold or sell? What is the reason for AMD stock climbing?
Looking back, 2016 might be a banner year for China rising in global economic prominence. At the Davos meeting in January 2016, George Soros warned about the European Union imploding and concentrated on Chinese industrial productivity. Brexit might have also encouraged the world to shift East.
What Changed for AMD on April 22, 2016?
On April 22, 2016, the AMD stock had “its best day in 40 years” due to its announcement of a “new licensing deal to a chip joint venture in China” according to Marketwatch.com. The AMD stock rose 36% in the morning with 66 million shares traded in 90 minutes. AMD was hot!
On this day, AMD was the “biggest gainer and the most active on the NASDAQ.” Experts calculate that the Chinese joint venture had placed $371 million in AMD’s pockets immediately. AMD is #2 in semiconductor chip sales and #2 in video game graphic chips globally. Before the Chinese deal, the company had been struggling to gain much traction, with some rumors of possible bankruptcy.
AMD Earnings from 2015 to 2016
Before the Chinese joint venture announcement, AMD had been hemorrhaging cash. This had led to a flat stock price as analysts worried about solvency. Here are the AMD earnings from 2015 to 2016:
- September 2015 was -0.19
- December 2015 was -0.12
- March 2016 was -0.14
- June 2016 was -0.07
Yes, those are negative figures – AMD was losing money hand-over-fist. The problem was that it was #2 in both of its key markets. AMD had recently jettisoned the ATI brand name for Radeon, but this had not increased sales dramatically.
Trade or Investment?
Of course, none of this analysis is meant to be investment advice. Jim Cramer asked Real Money’s professional chartist and analyst Bruce Kamich to break the AMD numbers down. AMD has risen 57% year-to-date, allowing the stock to reach a price last seen in 2014.
While computer sales are declining, game sales are red hot. Every couple of months, there seems to be a new superhero movie being released, which is naturally stoking demand. If AMD can improve its graphic chip gaming sales, then it could gain some momentum.
The AMD stock’s On-Balance-Volume (OBV) line and Moving Average Convergence Divergence (MACD) oscillators have moved into bullish territory. Thus, the technicals are looking quite ripe. This might be a solid trade for those who believe that the stock price will continue to rise. If the company can increase sales dramatically, then AMD might be an investment option. Only time will tell.