Bears in Charge Ahead of AMD Report

Advanced Micro Devices Inc. (AMD) reports Q1 2021 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.44 per-share on $3.20 billion in revenue. If met, earnings-per-share (EPS) will mark a 240% profit increase compared to the same quarter in 2020. The stock sold off 6.5% in January after beating Q4 2020 estimates and has continued to underperform into the second quarter.

Posting Year-To-Date Loss

AMD and NVIDIA Corp. (NVDA) posted impressive 2020 returns in reaction to multiple missteps at Dow component Intel Corp. (INTC). INTC sentiment has improved substantially in 2021 but that didn’t stop NVDA from posting an all-time high just two weeks ago. Sadly, AMD has failed to match the performance of either rival, slumping to an 8% year-to-date loss while entering the third month of dead price action at the 200-day moving average.

Raymond James analyst Chris Caso outlined the bull case last week, noting “the stock’s pullback has been driven by improved sentiment that Intel will solve their manufacturing challenges, which will reverse AMD’s successes. We’re taking the other side of that view. Now that Intel has committed to internal manufacturing, we think it’s unlikely that Intel ever regains a transistor advantage vs. AMD, and the current roadmaps ensure an advantage for AMD/TSMC through at least 2024”.

Wall Street and Technical Outlook

Wall Street consensus matches this analyst’s view, with an ‘Overweight’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, and 12 ‘Hold’ recommendations. However, three analysts now recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $70 to a Street-high $120 while the stock closed Friday’s session more than $20 below the median $105 target. This low placement reflects skepticism about the chipmaker’s ability to compete with larger rivals.

AMD completed a breakout above the 2000 high in the 40s in July 2020 and entered a trend advance that lost steam in the 90s in September. It posted an all-time high at 99.23 in January 2021 and eased into an intermediate correction that reached the 200-day moving average in February. Price action has gone comatose while a monthly Stochastic sell cycle still hasn’t hit the oversold level. In turn, this tells us that bears remain in firm control of the ticker tape.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.