Advanced Micro Devices Most Popular Among Financial Advisors Following Strong Earnings Report, Core Business Focus and Potential Cryptocurrency Growth Driver
With the earnings season in full swing, the stock market trends are mainly directed by the earnings reports of the companies that have the most weight on the index. During the trading week between July 24 and July 28, the S&P 500 inched down by 0.02%, although it had been poised for gains in the first three days. On Thursday, the index slipped following a sell-off registered by tech stocks, as investors became concerned over the possible end of net neutrality. On Tuesday, US Representative Greg Walden issued an invitation to top executives of tech giants like Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and broadband providers, including AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), and Charter Communications, Inc. (NASDAQ:CHTR), to testify before the Energy and Commerce Committee (chaired by Walden) on September 7. On Friday, the S&P 500 continued to lose ground, pushed lower by disappointing financial results of Amazon, Starbucks Corporation (NASDAQ:SBUX), and Exxon Mobil Corporation (NYSE:XOM), among others. On the other hand, Dow Jones Industrial Average gained over 1.15% during the last trading week and hit a record high on Friday, helped by Chevron Corporation (NYSE:CVX)’s financial report.
The second-quarter earnings season is now more than half-way through, with 57% of the companies in the S&P 500 having reported their results by July 28, according to FactSet data. Among these companies, 73% posted better than expected revenues, with Telecom Services, Energy, Materials, and Technology having registered the highest shares of companies with better-than-expected revenue. At the same time, 73% of the companies posted EPS above estimates, with Technology, Healthcare, and Utilities leading the sectors with highest percentages of companies that beat EPS estimates.
Financial advisors are also keeping an eye on the earnings mostly, according to TrackStar, the official newsletter of Investing Channel’s Intuition, which compiles a list of 20 most searched tickers among financial advisors in a week. Among the stocks that caught the attention of financial advisors for reasons other than their earnings are Vanguard FTSE Developed Markets ETF (NYSEARCA:VEA), which ranked as the third most-searched ticker last week. VEA offers exposure to stocks from the developed world outside the US and its popularity can be explained by IMF lowering the US economic growth forecast, while maintaining global outlook. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) ranked on the seventh spot, as the company had announced the launch of a new drug, SILIQ.
However, the most searched ticker among financial advisors last week was Advanced Micro Devices, Inc. (NASDAQ:AMD), which appreciated by 1.60% last week following a strong earnings report released on Tuesday. The semiconductor company posted EPS of $0.02, beating the consensus estimate of a break-even bottom line, while its revenue of $1.22 billion was higher than the expected $1.16 billion. The revenue advanced by 18.4% on the year, driven by a 51% jump registered by the Computing and Graphics segment.
Another factor that contributed to the bullish sentiment towards the stock was the strong guidance. Advanced Micro Devices, Inc. (NASDAQ:AMD) said it expects revenue to grow at a midpoint of 15% on the year, to approximately $1.50 billion, which topped the estimate of $1.39 billion. For the full-year, AMD expects revenue to increase in the mid to high-teens percentage, which is higher than its previous forecast of low teens.
What’s worth mentioning is that during the earnings call, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s CEO, Dr. Lisa T. Su said that the guidance does not include revenue growth due to cryptocurrency. The mining of bitcoin and other cryptocurrencies, which often uses AMD graphics cards, as a revenue driver was mentioned as a revenue growth factor, but the company doesn’t take it into account as a long-term driver and is instead focusing on its core gaming market. This shows that AMD is confident in its core business and at the same time they are keeping an eye on the cryptocurrency market. Digital currency prices have seen strong growth in the last couple of months, but it remains a volatile market and, even though Advanced Micro Devices, Inc. (NASDAQ:AMD)’s cards are highly popular among the miners, it’s a good thing that the company is not making a big bet on it. In the end, if the cryptocurrency market drives revenues even higher, investors will appreciate the over-delivery in sales. And if not, the focus will remain on AMD’s core business.
Even though Advanced Micro Devices, Inc. (NASDAQ:AMD)’s stock jumped by over 6% on the back of the earnings, it lost some ground in the following trading days. The stock reached a new 10-year high of $15.65 following the report, which many traders took as an opportunity to sell, given the stock’s 250% growth in the last five years. In addition, some analysts didn’t seem to be impressed with the results. On the day after the earnings, Goldman Sachs Group reaffirmed its ‘Sell’ rating and $11 price target. On the other hand, analysts at Wells Fargo & Company and Bank of America Corporation reiterated their ‘Outperform’ and ‘Buy’ ratings, respectively, and increased their price targets to $18.