Stocks

Advanced Micro Devices, Inc.: AMD Stock Reaches 52-Week High After Earnings

AMD stock recorded healthy gains on Wednesday and continued rising on Thursday after the company’s strong earnings results on Tuesday night. Several firms boosted their price targets for the chip maker, although most remain cautious on the company. AMD stock has skyrocketed by more than 500% over the last 12 months and shows no signs of slowing down.

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One Einhorn cub may still be getting hurt by Advanced Micro Devices, which we believe to be its biggest short position.

AMD stock target to $10.50

In a research note on Feb. 1, Credit Suisse analyst John Pitzer boosted his price target for AMD stock from $7 to $10.50 but maintained his Neutral rating. The chip maker reported revenues and earnings that were higher than the consensus for the fourth quarter and guided for first quarter revenue and earnings that were above on revenue and in line on earnings per share.

The company posted $1.11 billion in revenue, beating the consensus of $1.07 billion, and non-GAAP earnings of 1 cent per share, which was in line with the consensus. Advanced Micro Devices guided for first quarter revenue of $951 million to $1.02 billion, versus the consensus of $964 million, and a non-GAAP gross margin of around 33%.

Pitzer noted that Graphics and Mobile APUs drove the strength in the fourth quarter as Semi-custom system-on-chips fell seasonally. For the first quarter, the company continues to expect seasonal declines in Semi-custom SoCs and declines in C&G that aren’t as bad as seasonally expected.

Earlier-than-expected strength

Susquehanna analyst Christopher Rolland also reiterated his Neutral rating on AMD stock but raised his price target from $6.50 to $9 per share. He pronounced himself “somewhat surprised to see things at AMD getting better in front of new 2017 product launches.” He does feel that consensus estimates don’t reflect the company’s full earnings potential for the next two years, but he also believes that the “lofty valuation multiple” discounts all the expected improvements.

Other analysts also boosted their price targets for AMD stock. Canaccord Genuity analysts bumped up their target by $1 to $14 per share, while Wells Fargo’s David Wong raised his valuation range to between $11 and $13 and reiterated his Outperform rating.

AMD stock may be FireFly Value’s biggest short

Although we have no official confirmation on this, we believe AMD stock to be the short FireFly Value wrote about in its fourth quarter letter. If this is the case, then the position has brought even more pain in the wake of the latest earnings report. Short-sellers typically add to their shorts the higher a stock goes, and the tremendous ride this one has been on for the last year could make it of interest to short-sellers, particularly those that are skeptical about the lack of profits.

In its fourth quarter letter, FireFly Value described its second-worst performer as “a semiconductor company that has spent almost its entire existence at an R&D scale disadvantage to Intel.” Here’s what else the hedge fund had to say about the short, which it says is its largest.

“The company’s response has been to gut both SG&A and R&D to keep cash burn manageable and preserve hope. The bull thesis revolves around an oft-repeated mantra for struggling companies: ‘this time is different.’ Despite the hype surrounding the next product cycle, the company continues to suffer from a scale disadvantage and burn cash from operations. The company’s stock price quadrupled during 2016, but we continue to stand by our research, which indicates that the company’s structural disadvantages will eventually become too large to overcome.”

Again, we have no confirmation on this, but we believe this short to be AMD stock, as the description fits. Shares of AMD stock rose as high as $12.66—a new 52-week high—on Thursday.