A Stock that May Have Reached the Bottom of its Decline
Advanced Micro Devices, Inc. (NYSE:AMD) closed on Friday with a loss of 1.59% after reporting earnings, but on Thursday had seen a late push higher for gains of almost 10%. During the last week the stock was flat, and this occurred despite earnings that beat expectations. Yet despite this beat, revenue declined 31% yoy and the company’s gross margins continue to show significant weakness.
The weak PC market combined with AMD’s lost share in the industry has contributed to the stock’s large 70% decline over the last year. Thankfully, all of its problems are appropriately priced into its valuation, and for the first time, AMD saw some real progress.
First off, I was highly encouraged that the company beat expectations. Second, the company raised Q2 guidance. Third, server CPU revenue rose quarter-over-quarter. Lastly, the company stated that it is regaining desktop GPU share. These facts combined with an underperforming stock trading at just 0.38 times sales, gives me reason to be bullish, and believe that AMD might just be worth the risk.
“When a stock trades lower following a great report, it may be your best opportunity to buy.” Taking Charge With Value Investing (McGraw-Hill, 2013)
The key to successfully trading the reactions to earnings is to first read the report and to then look at a stock’s reaction. Then, you can find inconsistencies, and profit from those inconsistencies. With these three companies, all posted solid quarters relative to their valuations, and because of that fact, I believe that each presents some level of upside from this point forward.
The article 3 Stocks to Buy After Last Week's Earnings originally appeared on Fool.com.
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