AMD shares trim post-earnings spike

• Advanced Micro devices trades higher after Q1 earnings

• Much of the initial gain erased already

• Revenue jumped 71% YoY in Q1 2022, profit higher-than-expected

• Company not affected by PC demand slowdown, CEO says

Advanced Micro Devices (AMD.US) reported Q1 results yesterday after the close of the Wall Street session. Results turned out to be much better than expected and the company offered upbeat guidance for the current quarter as well as the full-year. This has led to a spike in the company's share price at the start of today's cash session but the majority of gains was erased later on during the session. Let's take a brief look at the company's earnings and chart.

Solid Q1 2022 results

AMD reported an over-70% jump in Q1 2022 revenue with all segments performing better than expected. Operating and gross margin were higher than expected as well. Adjusted EPS came in 26% above median estimate and more than 100% above Q1 2021 result. Company missed some expectations - like in case of capital expenditure or free cash flow - but it should not be much of a concern. AMD by no means look underinvested and its cash position remains strong at $4.74 billion in cash and cash equivalents (+169% YoY). 

• Revenue: $5.89 billion vs $5.3 billion expected (+71% YoY)

• Computer and graphics revenue: $2.80 billion vs $2.67 billion expected

• Enterprise, embedded and semi-custom revenue: $2.53 billion vs $2.33 billion

• Adjusted EPS: $1.13 vs $0.92 expected (+117.3% YoY)

• Adjusted Gross Margin: 53.0% vs 51.8% expected

• Adjusted Operating Margin: 31% vs 27.4% expected

• Capital Expenditure: $71 million vs $88.7 million expected

• Free Cash Flow: $0.92 billion vs $1.23 billion expected

Upbeat forecasts for Q2 and full-2022

Advanced Micro Devices not only reported stellar results for the first quarter of 2022 but also provided an upbeat guidance for the current quarter as well as full-2022. Company expects Q2 revenue to reach $6.3-6.7 billion while the market expects a guidance closer to $6.0 billion. For the full-2022, revenue is expected to jump over 60% to around $26.3 billion. That's a significant increase from a previous company's forecast of $21.5 billion. It is also much higher than $24.1 billion than expected by analysts' prior to the release.

There was a concern that after 2 years of pandemic-induced boom in PC demand, shipments of computers will slow. However, results, and especially guidance, from AMD point to the contrary. Lisa Su, AMD's CEO, admitted that the overall situation in the PC market is softening but segments the company is focused on - premium, gaming and commercial - continue to grow. CEO even said that she believes that Q1 2022 was an eight quarter of AMD increasing market share in the PC chip market. She also said that every segment of the company experienced significant double-digit growth in the first quarter of 2022.

A look at the chart

Taking a look at stock performance of Advanced Micro Devices (AMD.US) at D1 interval, we can see that share price launched today's trading with a big bullish price gap. Shares traded around 8% higher at the start of today's Wall Street session and were testing the resistance zone in the psychological $100 area. However, bulls were unable to hold onto those gains and sellers took over. Today's jump was almost fully erased, signaling that half year long downtrend may not be over yet. In fact, a stock would need to rally more than 25% off the current market price to brighten the outlook. A key resistance zone, that guards the downtrend, can be found in the $118 area, where 200-session moving average (purple line), previous price reactions as well as 50% retracement of upward move started a year ago can be found.

Source: xStation5