Nasdaq: AMD stock reports earnings after the close, here's what to expect

AMD stock was one of the darlings of 2021 but so far things have not repeated in 2022. A combination of factors has led many pandemic outperformers to return to normality and AMD and other semiconductor stocks have been some of the worst performers so far in 2022. Quite simply they just got too far ahead of themselves in 2021 with valuations stretching too far from average metrics.

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The correction has been a painful one so is it now time to reinvestigate the sector or are other alternatives still better positions to weather out this environment.

AMD stock news: Run of earnings beats to continue?

Well, firstly let's take a look at what the average Wall Street consensus is for AMD. Earnings per share are forecast to reach $0.91 on $5.52 billion of revenue. The last earnings report for Q4 for AMD showed a strong beat on EPS ($0.92 v $0.76) and revenue also beating estimates ($4.82 billion v $4.52 estimated). AMD has been on a strong run on beating earnings estimates which have helped fuel the strong gains in AMD stock. Not since 2019 has AMD missed on earnings.

That outperformance has helped the stock go from $27 in 2019 to a high of $160 by December 2021. Since then, however, AMD stock has fallen back to $89. Just before the pandemic struck in February 202, AMD stock was just reaching $60 per share, so it remains 50% above pre-pandemic levels. But over this period, revenue has more than doubled so AMD is now in a strong position than it was pre-pandemic. Net Income is nearly 50% ahead of pre-pandemic levels to the share price now looks more sustainable. 

However, we now face different macroeconomic challenges than in 2020. Inflation is raging and monetary policy is turning increasingly restrictive in the Western world. A recession looks imminent and big-ticket items that use semiconductor chips will be the first thing consumers scale back on. So outlook will be key to demand and the effect of inflation.

Intel (INTC) last week reported earnings but it was their forecasts that surprised many and hit the sector. Intel forecasts PC demand and so chip demand to slow in 2022 and issued guidance below analyst estimates for the remainder of the year. Intel CEO Pat Gelsinger also said he saw challenges for the industry out to 2024. 

AMD stock forecast: Bears trying to break below $73

A strong downtrend is in place. Comments from Intel have added to this so it will take an especially bullish earnings report to turn this sentiment around. AMD stock has a very strong support level at $73 but this has been tested repeatedly. The more a level is tested the weaker it becomes so we would expect a break if another test of the level is forthcoming.

This is exactly what happened at $100. Multiple tests eventually led to it breaking. This is our pivot, below AMD stock is bearish. Breaking $73 would then open the door for a swift move to $60 due to the volume gap identified.

AMD stock weekly

So, our longer-term forecast remains bearish but for intraday players, we feel the risk-reward is skewed to the upside. Intel (INTC) has now baked in the bad news and a bad outlook is priced in for AMD stock. Anything even slightly more hopeful should see a short-term relief rally. So trade accordingly.