Why Advanced Micro Devices Stock Gained 16% in January
What happened
Shares of Advanced Micro Devices (NASDAQ: AMD) made gains last month after the chipmaker benefited from a rise in tech stocks, a weak report from rival Intel, and anticipation for its own fourth-quarter earnings report, which came out after market hours on Jan. 31.
According to data from S&P Global Market Intelligence, AMD stock rose 16% in January.
Image source: Getty Images.
So what
The Nasdaq gained nearly 11% last month, pushing stocks higher broadly as investors reacted to signs that inflation was cooling off and that the Federal Reserve would continue to slow down its interest rate hikes.
Though the semiconductor sector has been in a correction for several months now, it is connected to the broader tech sector and will respond favorably to a slowdown in rate hikes.
There was no major company-specific news on AMD in January, but the it benefited from multiple analyst upgrades as Wall Street seemed to believe a cyclical bottom in end chip demand in markets like PCs was near.
On Jan. 23, AMD shares jumped 9.2% after Barclays upgraded the stock from equal weight to overweight. Analyst Blayne Curtis released more positive 2024 estimates for semiconductor stocks, and he raised his price target on AMD from $70 to $85.
The following day, Cowen reiterated an outperform rating and a price target of $100, with analyst Matthew Ramsay saying that the company remains in a very strong competitive position, and that he expected Q1 results to mark the bottom of the cycle.
Finally, the stock edged higher after rival Intel reported a dismal fourth-quarter earnings report and forecast a loss in Q1.
Now what
AMD shares surged on Feb. 1, climbing 12.6% after the company reported its own Q4 earnings report. Though it couldn't escape the headwinds in the industry, the company remains solidly profitable and delivered much better results than Intel.
Revenue rose 16% to $5.6 billion, which beat analysts' estimate of $5.5 billion, but adjusted earnings per share fell 25% to $0.69, due lower operating income in its client segment, which is focused on PCs. That result exceeded the consensus earnings estimate of $0.67 per share.
Looking ahead, AMD anticipates a challenging first quarter, calling for revenue to fall 10% to around $5.3 billion. Despite the weakness, investors were still encouraged by the results, and the company looks well positioned to take market share from peers like Intel.
10 stocks we like better than Advanced Micro Devices
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Advanced Micro Devices wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of January 9, 2023
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Intel. The Motley Fool recommends Barclays Plc and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short January 2025 $45 puts on Intel. The Motley Fool has a disclosure policy.
