Advanced Micro Devices Inc. experienced its worst day in past 12 years on Tuesday, as its shares heavily hurled and did not stand up to the high hopes of analysts.
The first-quarter results reported by the company on Monday were almost “up-to-the-mark” as expected; however, analysts showed concern for the margin outlook. Wall Street has already set its bar very high with the stock exceeding triple the number over the last year.
The stock AMD, −1.26% dropped down 24.4% to $10.30—the lowest and the modest close since 23 Jan 2017. This is the highest 1-day percentage turn down since it plunged 26.2% on 11 Jan 2005. On the other hand, volume reached a pretty good number of 266.6 Million shares, which exceeded 5 times the full-day average and was sufficient to prove the stock to be the most dynamically traded one on the major U.S. exchanges.
Christopher Rolland, the analyst at Susquehanna Financial, said, “AMD required an ‘almost perfect’ quarter in order to clarify the latest increase in share price; however, the results proved to be unfulfilling.” He further mentioned in a note to clients that new products of AMD have started propelling the growth, but possibly without all the benefits of gross margin they expected for.
Rolland held his rating at neutral and also maintained $12 for the stock price target, which is presently nearly 17% above the current levels.
Stephen Chin, the UBS analyst, confirmed his stock sell rating and $9 price target; this may result in the further selloff of nearly 13%, pertaining to the concerns that more time will be taken by the margin expansion story to develop.
Chin further wrote, “We maintain our stock sell rating as we anticipate a limited growth of EPS in future to support its high multiple since it needs to heavily invest in order to counterbalance with Nvidia and Intel. We also anticipate tight operating margin expansion in the coming term.”
According to FactSet, AMD has 148.6 as the price-to-earnings ratio for upcoming 12-month estimates as compared to Nvidia Corp.’s NVDA, −0.27% 37.0 and Intel Corp.’s INTC, −0.70% 13.0.