AMD Q4 preview: Where next for AMD stock?

When will AMD release Q4 earnings?

Advanced Micro Devices, better known as AMD, will publish fourth quarter and full year earnings after markets close on Tuesday February 1.

AMD Q4 earnings preview

Wall Street forecasts AMD will report a 39% rise in revenue to $4.51 billion, in-line with the company’s guidance, from the $3.24 billion booked last year. If it hits expectations in the fourth quarter, AMD is set to report a 65% rise in annual revenue in 2021, which was upgraded from its previous goal of 60% in the last quarter.

The larger of AMD’s two core divisions, Computer & Graphics, which includes sales of computer processors and graphics cards, is expected to grow revenue by over 24% in the quarter to $2.4 billion.

The other unit is the Enterprise, Embedded & Semi-Custom division, which is driven by sales of processors for data servers, tech for games consoles and system-on-chips, which are microchips that operate under one integrated circuit and act as the brain in products like smartphones and wearables. This division will also fuel growth with a 59% jump in sales in the quarter to $2.0 billion pencilled in by analysts.

The scramble for chips and components has allowed AMD to push up prices and the faster growth from the higher-margin enterprise division should allow profitability to improve, even if AMD is battling against higher costs like the wider industry. Its adjusted gross margin improved to 48% in the third quarter and should increase to around 49.5% in the fourth.

As a result, adjusted EPS is expected to grow at a faster rate of 45% year-on-year to $0.76 from $0.52 in the fourth quarter. However, reported EPS at the bottom-line is forecast to more than halve to $0.69 from $1.45 as a result of extremely strong comparatives from last year.

The initial outlook for 2022 will be under the spotlight. Tech stocks are expected to continue growing this year but at a markedly slower rate than we saw in 2021. The threat is that spending on new computers, devices and other equipment will experience a lull following the explosion in demand over the last two years during the pandemic. AMD provides guidance on a quarterly basis and analysts currently forecast revenue will rise over 25% year-on-year in the first three months of 2022 to $4.33 billion.

Wall Street currently believes AMD can grow annual revenue by around 20% in 2022 to $19.34 billion and that adjusted EPS, which is set to more than double in 2021, to grow 26% to $3.34.

Where next for AMD stock?

AMD shares have lost more than a third of their value since hitting an all-time high of $164 at the end of November, and the current downtrend that started at the turn of the year has only accelerated in recent weeks.

The selloff has pushed the share price below the 200-day sma for the first time in 7-months. If the current downtrend continues, we could see AMD fall toward $100, a key point of support during September and October. That is also likely to prove a key psychological level and a fall below there opens the door to greater downside potential toward $89 and then $84.

On the flip side, the RSI has recently slipped into oversold territory for the first time in more than three years, reinforced by rising volumes over the past week. AMD shares need to recover above the 200-day sma at $109 before considering larger gains toward the 100-day sma at $128 and then the 50-day sma at $140.

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