Advanced Micro Devices Confirms Reversal With A Vee-Bottom

Advanced Micro Devices Blow Past All Expectations

Advanced Micro Devices NASDAQ: AMD put in a solid Q4 and it should be no surprise and yet it was. The company is well-positioned within the semiconductor industry with products in key categories like data centers, gaming, and personal computing devices. Not only were the top and bottom-line results well above the consensus but the outlook for the current quarter and full-year 2022 can only be called robust. The news has shares up more than 10% in premarket trading and trading above the short-term moving average in a move that bears all the hallmarks of a reversal. In our view, this stock is set to move steadily upward over the next year on a rising tide of demand that is sure to lead to even better guidance down the road. 

“2021 was an outstanding year for AMD with record annual revenue and profitability,” said AMD President and CEO Dr. Lisa Su. “Each of our businesses performed extremely well, with data center revenue doubling year-over-year driven by growing adoption of AMD EPYC processors across cloud and enterprise customers. We expect another year of significant growth in 2022 as we ramp our current portfolio and launch our next generation of PC, gaming and data center products.”

Advanced Micro Devices Advances Its Outlook After Record Quarter 

Advanced Micro Devices capped off a record-setting year with a record-setting quarter and upping the guidance to well above the Marketbeat.com consensus estimate. The revenue is up sequentially to $4.83 billion or up 49.1% YOY and 685 basis points better than expected. The strength is driven by all segments with Computing and Graphics up 32% and Enterprise, Embedded, and Semi-custom growing a more robust 75%. 

Moving down the report, the company widened the margins on both a GAAP and adjusted basis due to revenue leverage and cost-control efforts putting the adjusted operating income up 75% from last year. The GAAP income grew a smaller 25% but there was a one-off tax benefit last year that more than makes up the difference. On the bottom line, the adjusted $0.92 is up $0.40 from last year and beat the consensus estimate by $0.16. 

The guidance is equally robust with only one thing to mar it. The forecast 45% revenue growth for the 1st quarter and 31% for the F2022 period show growth is slowing but that doesn’t matter. This growth is on top of high double-digit growth in 2021, several hundred basis points above the consensus, and is coupled with widening margins. 

Analyst Sentiment Firms For Advanced Micro Devices 

There have been no upgrades since Advanced Micro Devices released its Q4 earnings report but 10 analysts have raised their price targets and we think there will be more to come. The current Marketbeat.com consensus is near $148.65 and projects about 27% of upside from the pre-release closing price. The high target of $200, which is among the new batch of updates, adds another 33% or so on top of that.

The Technical Outlook: Vee-Bottom For Advanced Micro Devices 

As sharp as Advanced Micro Devices correction and reversal is, it is still technically a Head & Shoulders and not a true Vee-Bottom. Regardless, the stock is making a strong move higher from an extreme low driven by good news and aided by a moderately high short interest. The move may turn into a consolidation in the very near term but we see momentum building and the upward movement continuing. Assuming that support holds above the 30-day EMA near $127, we see this stock moving back up to retest its recent highs and then possibly moving up to new highs.