The semiconductor space is on track for its best quarter in nearly two decades, with the sector up nearly 22 per cent as of last Friday. Advanced Micro Devices (Advanced Micro Devices Stock Quote, Chart NASDAQ:AMD), Nvidia, Micron Technology and Applied Materials are all up more than 20 per cent for 2019, with AMD is the leader, gaining over 40 per cent year-to-date. And there could be more upside left, say panelists for CNBC’s the Options Actions.
“I’m looking at AMD,” says Brian Stutland, managing member at Equity Armor Investments, to CNBC on Friday. “When you see some of the news that has come out, we saw Micron give positive growth estimates, we saw Nvidia talk up the gaming market and how that could lead to extra growth in their earnings picture. Then AMD gave an announcement on teaming up with Google on gaming.”
“Certainly, it seems like it’s to the positive,” he says. “A lot of people in market were freaking out [on Friday] about stocks dropping as hard as they did but it’s rare that I see semiconductors lead near all-time highs and yet the market rolls over and goes lower. I think there’s some opportunity.”
AMD’s stock jumped on its last earnings report on January 30 when the company posted top and bottom line numbers that came in-line with expectations. The chip maker’s fourth quarter featured revenue of $1.42 billion, up six per cent year-over-year, net income of $38 million and EPS of $0.08. (All figures in US dollars.) 2018 turned out to be AMD’s most profitable in over half a decade, with overall 2018 revenue of $6.48 billion on net income of $337 million.
“One concern I would have about AMD is valuation,” says Guy Adami on Options Actions. “It’s not cheap at almost 29x forward earnings. [But] you have earnings growth for them for the first time in maybe decades, so good for them.”
“I think in terms of the chips, this is what you have going for you: obviously, you have earnings coming out in a month or so for many of these names. You also have President Trump now off a bad day in the market to maybe feel more inclined or more pressured to get a deal done with the Chinese, which could be the tailwinds for the last bit of movement to the upside for a lot of these names that really haven’t gotten back to the levels we saw in March of 2018,” Adami says.