What Happened:
Shares of computer processor maker AMD (NASDAQ:AMD) jumped 5.5% in the afternoon session after analyst Stacy Rasgon of Bernstein suggested in a research report titled 'Q1 CPU Channel Drain - Still Ugly but Less ugly' that the PC market is undergoing a phase of "normalization" to pre-COVID-19 levels. The analyst added that the correction in the PC market may look bad when compared to the pandemic pull-forward in demand but is actually in-line with pre-COVID levels (41 million notebook shipments in Q1'23 vs. 39 million in Q1'19). Rasgon added that "the current correction probably has a quarter or two more to go, and a normalization in the back half of the year appears plausible." Stabilization rather than further declines is certainly good news. After the initial pop the shares cooled down to $102.17, up 4.9% from previous close.
What is the market telling us:
AMD's shares are very volatile and over the last year have had 34 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 14 days ago, when the stock dropped 5.91% on the news that the company reported first-quarter results that narrowly beat analysts' revenue estimates. EPS also beat. However, free cash flow fell short of expectations, and inventory levels increased. In addition, revenue guidance for the next quarter was below the Consensus estimates. Management added that the company was still dealing with "a mixed demand environment" in which revenue growth is expected to be "flattish" during the rest of the first half of the year. Overall, it was a weaker quarter for the company. Following the results, Bank of America analyst, Vivek Arya downgraded the stock's rating from Buy to Neutral (Hold).
AMD is up 59.7% since the beginning of the year, and at $102.17 per share it is trading close to its 52-week high of $108.59 from June 2022. Investors who bought $1,000 worth of AMD's shares 5 years ago would now be looking at an investment worth $7,970.
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