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Wednesday, May 16, 2018

AMD: Stock Break Out And No Joke 100% Upside From Here

AMD stock is up over 3% today on a bear sell-sider turned neutral. But the stock has had a monster monster run since earnings. If you remember way back we were pretty bulled up ahead of earnings.  Since then the stock is up 33% in 15 measly trading days since earnings. Not bad right? But, we think there's more to come as we'll show.

Look At This Sweet Level


amd stock chart
Source
We drew a line and a bunch of arrows on the AMD chart to the left going back over a year.

If you notice that the price level of 12.37 was a key support resistance.

Click the chart and you'll see that the exact point was the exact turning point many times.

This clear break higher than that level is an important bullish sign.

Short Interest Hardly Budged

The AMD shorts are sold that AMD's going down. They are not letting go. NASDAQ reported that AMD shorts only dropped by about 7% since earnings. Shorts haven't budged after a blow out quarter.  That's fun for us bulls because the fundamentals are so strong which may be why you get a nice decisive break topside of a key level today.

One bear sell-sider folded. Sometimes sell-siders smell blood on the buy-side and can change their recommendations on that.  If so, there may be many shorts just waiting for that one last pullback to get out.

But this topside breakout could mean that long-awaited pull back, may not come so fast.

Sorry shorts.

Our Numbers Go Up

Our earnings numbers go up to $.73 from $.61 for 2018 which gives us about about 100% stock price appreciation potential now.

When we spoke with the company we went through the drivers and they sound huge. I would guess the company's being conservative because they have too many drivers. They have a huge OEM ramp this quarter. They have Ryzen ramping all year. EPYC, if anything may have been slowed down by Meltdown and Spectre in Q1 and numbers still blew out. So EPYC can, if anything accelerate through the year.

They are probably seeing that now which is probably why they said they are confident in their EPYC plans for the year at JP Morgan's conference yesterday. Because business is picking up for EPYC.

Did anybody notice AMD said they expect to double their Ryzen share in the next couple of years.

What's left?  All their businesses are expecting big market share gains or have big growth stories.

Intel Share Gain Set Up

Intel on the other hand has been reported to push out their next node upgrades which we reported to subscribers Mid March.

Meditate on this set up for AMD for a moment.  

Intel's doing amazing (as per their last couple of earnings reports) even with push outs. Why? Because traditional companies, enterprise customers, are in buying tech again. It's not just cloud / hyperscalers buying tech. Tech spend is now much more broad based thanks to a solid economy and maybe the new tax legislation freeing up money to spend.

So if Intel is doing great with pushouts, how's AMD going to do with catchups? Probably pretty amazing.

And only 7% of the shorts gave up. Oh so sweet.

Revenues, No Way The Guide Is Right

The company guided to $1.725B in the second quarter. We look at the two-year run rate. That's how you catch companies not showing all their cards.

The two-year means adding up this year's quarter's growth rate plus last year's quarter's growth rate. It shows you an underlying trend smoothing out one-timers.

Look at this two-year growth rate.


2017 2017 2017 2017 2018

Q1 Q2 Q3 Q4 Q1





A
Total Revenues 1178 1151 1584 1340 1647
YOY 41.59% 12.07% 20.92% 21.82% 39.81%
2yr 22.36% 21.10% 44.50% 36.64% 81.40%
QTQ 7.09% -2.29% 37.62% -15.40% 22.91%

Do you notice anything?  Which way is that two-year line going.  22% to 21% to 44% to 36% to 81%. It's going higher.  Their guide implies that it slows for Q2. But EPYC and Ryzen are, if anything, building. That two-year can continue to accelerate, which would make numbers blow out.

That's how we spot big potential stories. How are the numbers trending? What makes sense going forward based on the drivers?  AMD has too many drivers. Intel catch up, EPYC, macro tech spend, and too many drivers.

Let's Conclude

We were pumped going into earnings as you know.  Nothing's changed except maybe my numbers go higher. Still big upside and still too many shorts.  Oh yeah, and a nice decisive breakout higher today from a key level.



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