Advanced Micro Devices Analyst 'Surprised By Weakness' Heading Into Q3 Earnings: What To Watch

Advanced Micro Devices AMD will print its third-quarter 2022 earnings after the closing bell on Tuesday.

When the semiconductor company printed a second-quarter earnings beat on Aug. 2, the stock closed slightly lower the following day with a delayed reaction. Bullish momentum came in on Aug. 4 and AMD surged 6.84% to close the session at $103.86.

For the second quarter, AMD reported non-GAAP earnings per share of $1.05, higher than the consensus estimate of $1.03. The company reported revenues of $6.55 billion, slightly exceeding the consensus estimate of $6.53 billion.

For the third quarter, analysts, on average, estimate AMD will report earnings per share of 74 cents on revenues of $5.82 billion, down considerably from the last quarter.

The AMD Analyst: On Monday, Morgan Stanley analyst Joseph Moore maintained an Overweight rating on AMD and lowered the price target from $86 to $77.

The AMD Takeaways: In a note, Moore cited "some softness in cloud spending and mild deceleration as shortages ease” as the reason for the price cut but said Morgan Stanley is still bullish on the stock over the long-term.

“We had thought that AMD might be less impacted by cloud inventory corrections, given tight server CPU supply until very recently, but high single digit growth seems unlikely,” the analyst said.

Slowed growth will continue to impact AMD during the fourth quarter of this year and the first quarter of 2023, he said, adding that he sees “growth resuming thereafter.”

Morgan Stanley expects AMD to report EPS of 70 cents Tuesday on revenues of $5.59 billion.

In terms of the stock price, Moore said he “is surprised by the weakness” and said the stock could remain sluggish in the near-term due to “the magnitude of deceleration in the business.”

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The AMD Chart: AMD reversed into an uptrend on Oct. 13 and has since made a series of higher highs and higher lows. The most recent higher high was formed on Oct. 27 at $62.72 and the most recent higher low was printed at the $58.51 mark on that same day.

• Since then, AMD has been unable to break above or below that trading range, which has caused the stock to print a quadruple inside bar on the daily chart. The pattern is neutral in this case and will likely break after AMD reports earnings.
• If AMD enjoyed a positive reaction to its earnings print, the stock will regain the 21-day exponential moving average, which will give bullish traders more confidence going forward. If the stock suffers a bearish reaction, AMD is likely to form a new 52-week low, and because the stock hasn’t traded under that level since July 23, 2020, there isn’t a lot of solid support.
• AMD has resistance above at $61.77 and $66 and support below at $58.92 and $55.84.