AMD share price on a tear pre-earnings

AMD share price: 3 things to watch out for in Q2 results

1. Sales performance
Following the solid Q1 2019 growth performance and launch of its new Ryzen desktop central processing units (CPUs), AMD’s share prices had been on a tear, chalking up gains of more than 80% mid-July ahead of its Q2 2019 earnings release. With strong expectation of sales growth for 2019 – placed at a ‘high single digit percentage’ range according to the company – the upcoming report will be scrutinized for its performance on this end.

According to the current market consensus polled by Refinitiv, revenue for Q2 2019 is expected to be at $1.52 billion, falling near the mid of the AMD’s guidance range. If materialized, this will reflect an uptick from the previous quarter but nevertheless mark a 13% drop from the same period last year. Earnings per share is estimated to come in at 8 cents. Note that reports had also suggested thus far that the strong US dollar had been a concern for many companies with significant overseas sales, a characteristic shared by AMD where only one-fifth of revenue had been generated domestically in the US in 2018.

2. Guidance
While the reflection on AMD’s Q2 performance will be critical for prices, the guidance coming through will be of higher importance as we move forth into H2. AMD’s share price had soared on the announcement of the new third-generation Ryzen CPU and these new product launches are expected to power AMD into the second half. Reports had also suggested that based on data from Danawa Research, AMD’s latest Ryzen CPUs had exceeded that of competitors in major Asia markets, one that should boost confidence for outlook. With the market pricing in the expectation of the current full-year guidance, any amendments here will also play to price movements.

Notably, while AMD had led competitors such as Intel and NVIDIA in terms of price performance at both the start of the year and in 2018, poor guidance from NVIDIA had been one to likewise affect AMD in its Q1 earnings release. Intel and NVIDIA are estimated to release earnings on July 26 and August 16 respectively, ones to watch.

3. Macro backdrop
As alluded to in our US Reporting Season preview, the season on balance is shaping up to be a negative one. That said, AMD is expected to hold the fort into H2. This comes with the recovery of the Philadelphia Semiconductor Index (SOX) as shown in the chart below. Prices can be seen once again approaching the April’s high after the escalation in trade tensions with China briefly weighed on it.

The macro backdrop coupled with earnings performance of the broad market and tech sectors alike are nevertheless items to watch as the bulk of the earnings get released into end-July.

Source: MarketWatch, FactSet

AMD share price: technical analysis

From a technical perspective, AMD share price have clearly exhibited strong upward momentum, keeping to the uptrend. The icing on the cake for bulls had perhaps been the latest clear breakout of the $32.62 resistance. That being said, an overbought situation looks to be forming that could invite some caution particularly ahead of the earnings release, one to watch. Uptrend support nevertheless expected to hold, unless a severe disappointment is seen in the set of Q2 releases.

Source: IG Charts