Option Trade 
Advanced Micro Devices, Inc. (NASDAQ:AMD) Calls 
Friday, March 31, 2017

** OPTION TRADE: Buy the AMD APRIL 21 2017 14.000 call at approximately $0.75. Place a pre-determined sell at $1.50.

Note: No protective stop losses added -- but if you wish to do so make it $0.30.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

by Ian Harvey   

Advanced Micro Devices, Inc. (NASDAQ:AMD), a global semiconductor company, stock price rallied in the last twelve months, surging from a 52-week low of $2 a share in the beginning of FY2016 to the highest level in the last eight years. AMD stock is currently standing just below its 8-year high of $15.55 per share, while several analysts see further upside in the coming days. Top hedge funds & private equity firms are betting big on this stock… which could be one of the biggest trades of 2017.

AMD has been enticing investors with its innovative technologies and strong financial results. In the latest quarter, its revenue increased 15.9% to $1.11 billion over the same period last year, beating the consensus estimate by $40 million. The strong growth in revenues was driven by its product innovation and regaining the share in key markets. Advanced Micro Devices cash and cash equivalents also increased $6 million to $1.26B over the previous quarter.

Its CEO said, “As we enter 2017, we are well positioned and on-track to deliver our strongest set of high-performance computing and graphics products in more than a decade.” In the latest quarter, it’s computing and graphics segment increased 28% to $600 million, thanks to higher GPU and client processor sales.

Therefore, the company is set to generate 17% sales growth in the first quarter this year, compared to the same period last year. In addition to strong growth in revenues, AMD’s cash generating potential will also strengthen, allowing investing in growth opportunities. Overall, despite a sharp rally in the last twelve months, AMD stock price has further upside in the coming days.

Independent securities and investment banking firm Jefferies has set a price target of $16 for AMD's stock due to the company's "higher responsiveness and better execution." Jefferies is particularly upbeat on AMD because of Ryzen, AMD's new desktop chip, and its upcoming Zen-based Naples server chip.

Advanced Micro Devices, Inc.’s 50-day moving average is $13.77 and its 200-day moving average is $10.01. Advanced Micro Devices, Inc. has a 12 month low of $2.60 and a 12 month high of $15.55. The firm’s market cap is $12.90 billion.

AMD hit a multiyear high of $15.55 on Feb. 28 before dipping more than 20% to test support at its 50-day moving average. Support held, and while the shares fell to a low of $12.38 on March 6, they were able to rebound to close the day at $13.04.

That was the technical signal that gives the view that AMD is now a potential buy.

AMD has shown a marked change in trend levels over the course of recent market activity. Based on recent activity surrounding both the 50 and 200 SMAs, there’s been a marked trend created which can be described as bullish.

Influencing Factors to Consider               

Advanced Micro Devices, Inc. announced, in conjunction with game developers Stardock and Oxide Games, the completion of initial optimization of “Ashes of the Singularity” for AMD Ryzen desktop processors resulting in significant performance increases. The popular game title, which initially launched one year ago, demonstrates significant performance increases in game play and an up to 30 percent increase in “Average Frames Per Second All Batches” in-game benchmark performance, placing AMD Ryzen 7 1800X in elite performance levels for the game.1 Stardock and Oxide Games are premier participants in the AMD Ryzen game development program that spans numerous significant game development houses and titles.

On Amazon.com (NASDAQ:AMZN), Ryzen 7 takes three out of the 20 top spots in bestselling CPU processors. 91 percent of the reviews from customers buying the 1700 model, which includes an LED Cooler, ranked the chip a perfect 5 out of 5 stars.

Targeting the mainstream market, AMD will release Ryzen 5 on April 11; the low price range will very likely result in AMD taking market share from Intel.

AMD continues developing the Ryzen line. The company has a large team of engineers working on the second generation. Led by Mike Clark coordinating the entire global team, future Ryzen chips will be manufactured on a smaller process.

AMD will likely grow its GPU market share as more notebooks offer solutions built on the Polaris architecture. Last quarter, AMD launched the Radeon Pro 400 mobile GPU. Apple, Inc. (NASDAQ:AAPL) chose this chip in its latest high-end MacBook Pro. PC Ultrabook manufacturers may start offering this solution in the months to come.

AMD's revenue will increase due to product differentiation. AMD will bring several accelerators to support heterogeneous computing. In the era of MI, there will be a multitude of workloads and specific accelerators will support specific workloads. These accelerators will actually blend various microprocessor and graphics technologies for making heterogeneous computing a success.

Analysts and Hedge Funds Opinions

Jefferies increased Advanced Micro Devices share price target to $16. Jefferies’ analyst said, “Checks in the Asia PC supply chain are observed as supportive of a “systemic turnaround” regarding Advanced Micro Devices. Further cited are increased responsiveness, improved execution, interest in Zen desktop MPUs and positive expectations for Zen server solutions”.

As well, Advanced Micro Devices, Inc.‘s stock had its “buy” rating reaffirmed by Bank of America Corp in a research report issued on Friday. They currently have a $16.50 target price on the semiconductor manufacturer’s stock. Bank of America Corp’s price objective would indicate a potential upside of 20.57% from the stock’s previous close.

Several brokerages have issued reports on AMD….

  • Susquehanna Bancshares Inc raised their price objective on shares of Advanced Micro Devices from $9.00 to $12.00 and gave the stock a “neutral” rating in a research report on Monday, March 20th.
  • Jefferies Group LLC raised their price objective on shares of Advanced Micro Devices to $16.00 and gave the stock a “buy” rating in a research report on Monday, March 20th.
  • Canaccord Genuity raised their price objective on shares of Advanced Micro Devices to $17.00 and gave the stock a “buy” rating in a research report on Thursday, March 9th.
  •  Rosenblatt Securities reissued a “buy” rating and set a $16.50 price objective on shares of Advanced Micro Devices in a research report on Sunday, March 5th.

Seventeen analysts have rated the stock with a hold rating, ten have assigned a buy rating and one has issued a strong buy rating to the company. Advanced Micro Devices presently has an average rating of “Buy” and a consensus target price of $12.57.

Several hedge funds have recently modified their holdings of the company……

  • Oregon Public Employees Retirement Fund boosted its stake in shares of Advanced Micro Devices by 3.7% in the third quarter. Oregon Public Employees Retirement Fund now owns 222,162 shares of the semiconductor manufacturer’s stock worth $1,535,000 after buying an additional 7,894 shares during the period.
  • Creative Planning boosted its stake in shares of Advanced Micro Devices by 61.6% in the third quarter. Creative Planning now owns 71,178 shares of the semiconductor manufacturer’s stock worth $492,000 after buying an additional 27,125 shares during the period.

Harvey’s Options Volatility Indicator

Conclusion

In the quarters that follow, AMD will report strong Ryzen and Polaris sales growth. Ryzen 5's release and the imminent announcement for Vega will give the stock a lift.

With the better visibility into Ryzen 7 and the imminent Ryzen 5 launch on April 11, a peerless leadership strategy -- CEO Lisa Su's plan of matching product performance with Intel, at cheaper price points has worked – and Advanced Micro Devices' ability to balance pricing and competitive performance, has been fairly impressive and will help insure further growth.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

 ** OPTION TRADE: Buy the AMD APRIL 21 2017 14.000 call at approximately $0.75. Place a pre-determined sell at $1.50.

Note: No protective stop losses added -- but if you wish to do so make it $0.30.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.


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