AMD Stock Dips Despite Strong Earnings: What’s Next?
Advanced Micro Devices’ (NASDAQ: AMD) share price dropped over 10% after presenting an impressive earnings report. The decline reflects cautious Q1 guidance, but analysts predict sustained growth driven by artificial intelligence (AI) initiatives. Although datacenter growth has slowed slightly, it remains robust and increased by nearly 70% last quarter, indicating the company is not in immediate trouble.
AMD’s Stock Tumbles Following Record Earnings Report
Despite record-breaking fourth-quarter results, Advanced Micro Devices faced a stock price drop, as the guidance did not meet high analyst expectations reported by MarketBeat. Nonetheless, the company is projecting another quarter of notable growth with revenue expected to rise by 30% and profit margins to widen. CEO Lisa Su is noted for her careful forecasts.
Looking at Q4 performance, there were no major concerns—the net revenue hit $7.7 billion, up 24% year-over-year, indicating momentum in both the datacenter (DC) and Client segments. DC revenue surged by 69%, while the Client segment increased by 58%, driven by strong demand for Instinct GPUs, EPYC CPUs, and Ryzen processors.
However, there were some weak areas. The Gaming segment saw a near 60% decline, reflecting ongoing demand issues, while the Embedded segment experienced a 13% contraction. Weakness in Gaming may persist into 2025, although the Embedded sector is expected to bounce back soon as demand for manufacturing and IoT rises.
On the margins front, good news emerged for investors. The adjusted gross margin expanded by 300 basis points, and the operating margin increased by 200, boosting profits significantly. Adjusted earnings reached $1.09, a 41% year-over-year increase, thanks to improved profit quality. Analysts anticipate this revenue momentum will continue into 2025.
AMD Makes Strategic Moves While Investing in AI
In 2024, Advanced Micro Devices increased shareholder value, even amid an “aggressive investment” approach in AI outlined by its CEO. The balance sheet shows a steady cash position and lower short-term investments, compensated by higher receivables and inventory. The net outcome is a 2.8% rise in shareholder equity, suggesting more gains could come in 2025.
Analysts maintain a positive outlook on AMD stock, though the current guidance has led to some price target reductions, affecting market sentiment. Despite this, the majority—21 out of 29 analysts, or 72%—have a Moderate Buy rating for the stock.
Revisions indicate the stock at the lower end of predictions, with a significant potential upside of around 40% based on consensus estimates. Notably, Rosenblatt Securities reaffirmed its Buy rating with a $250 price target, implying more than a 100% upside for AMD stock.
AMD’s Stock Nears Key Support Level
Following the Q1 guidance, Advanced Micro Devices’ stock is now trading near a crucial support level established in 2023, which had been significantly impacted by the AI hype that drove prices up by 100%. Current market indicators suggest an oversold condition, with the stock having retraced fully from its prior rally and decreasing trading volume indicating a waning sell-off conviction.
A significant rebound could be on the horizon; however, the timing remains uncertain. The critical support area is marked between $95 and $105, which may be tested multiple times before a sustainable rally can gain traction.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
