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Advanced Micro Devices Inc. CEO Hector Ruiz delivers his keynote at the Oracle Open World conference in San Francisco, in this Monday, Nov. 12, 2007 file photo. (Paul Sakuma/ASSOCIATED PRESS)
Advanced Micro Devices Inc. CEO Hector Ruiz delivers his keynote at the Oracle Open World conference in San Francisco, in this Monday, Nov. 12, 2007 file photo. (Paul Sakuma/ASSOCIATED PRESS)

Schizas’ Mailbag

Chip maker’s stock reflects a sector in decline Add to ...

Hello Lou,

What are your thoughts on AMD?

George

Hey George,

Thanks for the assignment.

This will be the second time that I examine the case for Advanced Micro Devices Inc.

On Oct. 7, 2013, as the shares were trading for $3.91, Joe wasn’t sure if he should invest and asked for an analysis. The research conducted on his behalf indicated that there were few signals supporting a buy and that he would be well served to be patient ahead of the release of third-quarter results on Oct. 17, 2013. The stock did run up to $4.10 by the 17th but gapped down to $3.50 on a weak sales forecast for the fourth quarter. From there it continued to sell off for three sessions hitting bottom near $3.00. There is nothing like a 25 per cent haircut in about a week to put a chill down your spine.

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The stock has seen some buying off the lows and another inspection of the charts will contribute to my thoughts on AMD.

The three-year chart outlines a stock that came off a rock bottom in November of 2012 and ran aggressively to $4.50 by July of 2013. That however was as good as it got as the shares pulled back to $3.00 on the weak sales forecast for the fourth quarter. The MACD and the RSI both signalled that buyers were taking positions off the October lows which pushed the shares to the $3.70 range in December.

The rub with AMD is that their core business is supplying chips for personal computers which have seen sales declines for the last six quarters as tablets continue to increase their share of the market. The company has ambitions in the mobile space but thats not like having a gotta-have product that OEM’s are lined up to buy.

The six-month chart provides a close-up of the resistance at $4.00 that has to be overcome in a convincing manner to take some of the risk off of the table as to the strength of the current move up. The MACD and the RSI are neutral at this point while the stock continues to labour under a longer-term downtrend.

If you like the AMD story then monitor the shares and see if it can sustain its current uptrend and get over $4.00.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

 
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