AMD Weekly option trade
Yesterday we executed an options call trade on Advanced Micro Devices, Inc. (NASDAQ:AMD), which returned 200%
profit in two and a half hours. The stock has continued to climb upwards.
AMD has been an outstanding performer on the stock market so far this
year, with shares of beating the broader market by comfortable margins.
Advanced Micro Devices is a semiconductor giant, producing advanced
computer chips that power some of the most popular devices on the market.
Consumers are demanding more intelligent goods with functions beyond their
formerly typical use-cases (internet connectivity inside cars, for example),
and AMD will play a critical role as these trends progress.
The company's chips can be found in a number of products you've likely
interacted with recently, including Sony's PlayStation 5, and Microsoft's Xbox
Series X and Surface line of devices. But it struck an even more exciting deal
earlier this year that will see AMD chips powering Tesla's Model S and Model X
REASONS FOR THE AMD WEEKLY OPTION TRADE
The AMD weekly option trade was recommended
to our members based on several catalysts.
1. Earnings and Forecast…..
released its third-quarter results for the three months ending on Sept. 25. It
reported stellar growth once again, with revenue jumping 54% year-over-year to
$4.3 billion during the quarter. Adjusted gross margin was up 440 basis points
year-over-year to 48%, while non-GAAP net income shot up 78% to $893 million.
The chipmaker's third-quarter earnings came in at $0.73 per share, up
substantially from $0.41 per share in the prior-year period.
importantly, AMD increased its full-year revenue forecast due to solid demand
for its chips, which are used in computers, gaming consoles, and data centers.
The company now expects 65% revenue growth in 2021, up from its prior guidance
that called for a 60% increase.
AMD has raised
its full-year revenue guidance each time it has reported results this fiscal
year. The company had originally guided for 37% revenue growth when it released
its fourth-quarter 2020 results in January this year but raised the guidance to
50% growth when it released its Q1 report. And then to 60% when it released its
Q2 earnings in July!
AMD seems to
be making headway in the GPU market. AMD pointed out in its latest earnings
conference call that revenue from data center GPUs more than doubled over the
year-ago period. Management also said that sales of its consumer graphics cards
increased "significantly" thanks to the launch of new graphics cards
at aggressive prices.
AMD supplies data center CPUs and gaming console chips through the enterprise,
embedded, and semi-custom (EESC) business. Nvidia currently doesn't have a
presence in the data center CPU market, with its Grace CPU only expected in
2023. This paves the way for AMD to take more market share away from Intel by
that time and boost its data center business.
3. Semi-Custom Chips…..
semi-custom chips are used in the PlayStation 5 and the latest Xbox consoles,
and the upcoming Steam Deck would add another gaming console to its portfolio.
Nvidia, meanwhile, has only the Switch console from Nintendo to tap into the
gaming console space.
AMD gets its
revenue from two segments, as discussed earlier. The computing and graphics
segment sells Ryzen processors that are used in desktops, notebooks, and
workstations, as well as graphics cards that are used by both gamers and data
centers. This business was in fine form last quarter and recorded 44%
year-over-year revenue growth to $2.4 billion, accounting for 56% of AMD's
chipmaker saw an increase in the average selling price of its Ryzen processors
and graphics cards, as customers bought more high-end products. There were
quite a few solid takeaways from this segment, as AMD saw an increase in the
adoption of its Ryzen 5000 mobile processors by notebook OEMs (original
equipment manufacturers). At the same time, the commercial deployment of
notebooks based on Ryzen processors increased significantly during the quarter
across public-sector organizations and Fortune 1000 companies.
the launch of Ryzen 5000 desktop processors with integrated AMD graphics also
met with a solid response from the market. AMD says that it has now gained
market share in the client-processor market for six quarters in a row.
Research estimates that AMD held 20% of the notebook CPU market at the end of
the second quarter, while its share of the desktop CPU market stood at 17.1%.
Intel controlled the rest of the market but has been steadily losing ground to
AMD in these markets because of the latter's technological advantage. AMD has
room to gain more market share from Intel in the processor space, and doing so
could substantially increase the chipmaker's computing and graphics revenue in
the long run.
the enterprise, embedded, and semi-custom (EESC) segment, which accounted for
the rest of AMD's revenue last quarter. The company registered a 69%
year-over-year increase in sales in this segment to $1.9 billion. The strong
demand for gaming consoles from Sony and Microsoft, which use AMD's semi-custom
processors, was a key catalyst for this segment. More importantly, AMD's
semi-custom revenue seems set for long-term growth as the demand for the
PlayStation 5 and the latest Xbox consoles is expected to grow at a nice pace
in the coming years.
server-processor market turned out to be a happy hunting ground for AMD, as the
company registered its sixth-straight quarter of record server revenue. AMD's
server-processor revenue more than doubled year over year, which isn't
surprising as it's been taking away significant market share from Intel in this
space. In the second quarter, AMD's server-market share was up 3.7 percentage
points year over year to 9.5%.
EPYC server processors being selected by more supercomputers and cloud-service
providers, the chipmaker's server-market share could head further north. With
AMD anticipating that the server-processor market could hit $19 billion in
revenue by 2023, a higher market share could boost its revenue big time.
7. Analysts Thoughts.....
another strong earnings report at the end of October, which caused several
analysts to raise their near-term price targets. The highest price target is
$180, with most analysts bullish on the stock.