Advanced Micro Devices Is a Short Ahead of Earnings

Whatever Advanced Micro Devices (AMD) can do, NVIDIA can do better. At least this has been the case for the last few years as NVIDIA has outwitted Advanced Micro Devices multiple times and has established a dominating position in the GPU market.

While NVIDIA has cemented its position as the market leader, Advanced Micro Devices has struggled due to growing losses and below-par products. However, the market is expecting things to change soon with the arrival of Advanced Micro Devices’ Polaris architecture.

Advanced Micro Devices has staged triple-digit gains since the last earnings report, as investors have put the money into the stock in the hopes that Polaris will kick start the company’s revival.
While it is true that Polaris architecture is a success and did a lot better than its predecessors, Advanced Micro Devices’ rally is still unjustified.

Heading into the earnings season after the strong rally, the smallest bit of negative news can send the stock crashing. Advanced Micro Devices has already made a mistake by sitting out of the top end market by not introducing any product, whereas its RX 460, 470, and 480 graphics cards for the budget GPU market are reported to have some problems.

It was reported that RX 480 was consuming more power than the company advertised. The company gained early movers advantage by launching its cards way before NVIDIA. However, this recent setback can allow NVIDIA to regain the lost advantage in the lower-end market.

Advanced Micro Devices will have to report stellar numbers just to sustain its current price. Bulls may have run the stock up too high for it to be justified. Advanced Micro Devices has very limited upside at current levels and is a very risky stock to hold heading into earnings.

Going by Advanced Micro Devices’ history, the chances of Advanced Micro Devices’ reporting underwhelming earnings report are high, which is why I think the stock is a short.

Conclusion

Advanced Micro Devices will find it very difficult to justify its current price. Bulls have run the stock up too high, and the upside at these levels is pretty limited. Advanced Micro Devices is a very risky stock to hold or buy heading into earnings.

Since the smallest bit of negative news can send the stock spiraling downwards, I think investors should short Advanced Micro Devices heading into earnings.

Disclosure: No Position
Published on Jul 13, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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