Advanced Micro Devices (NASDAQ: AMD) is looking to finally move in the right direction after many years in which it has consistently failed on improving shareholder wealth.
From a $40/share price in 2006, here we are, almost a decade later, and the company’s shares are trading at $2.58/share. That’s a staggering decline in price and company value, especially if you’re considering what the general stock market did in the same period of time.
As a short reminder, three QE (Quantitative Easing) programs later and after the taper tantrum, US indices are setting new record highs, with S&P 500 sitting well above the 2100 mark and DJIA (Dow Jones Industrial Average) trading at 18k.
However, AMD has not joined this party, and the first quarter of 2015 revenue miss sent the share price down 10%. This was because it was clear that the second quarter and the ones to follow would not bring any positive outcome if nothing has changed thus far.
Where can AMD go now?
Here we are, with stories developing that AMD, which for so many years tried to survive and fight in a market dominated by the largest chipmaker in the world, Intel, is finally pulling itself out of its predicament. That there are rumors that AMD will split in order to free cash flow and allow its most competitive arms to get rid of the drains on financial and technical resources.
Investors cheered the news which sent prices up around 3%, but we should keep in mind that this is only a rumor. However, there is no such thing as smoke without a fire and if I were to pick a stock to trade to the upside these days, then one that didn’t perform in the years the Fed was doing the QE would be my choice. Just like that, AMD has become an interesting stock for a call option.
This week saw the Federal Reserve in the United States keeping the interest rate steady, or to be more precise they didn’t hike the rates as expected. This meant that in the days following this, the Nasdaq was making a new all-time high as lower rates equate higher stock prices. Yet AMD failed to jump that much.
This inversed correlation may be just what we need for trading a call option with the end of June expiration date and if it is going to expire in the money, then I would take another chance in July for a new call option with the end of month expiration.
Proving recent fundamentals would prove right, chances are this is a bottom for AMD.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
