The tech space has been a roller coaster over the past six months, and largely to the downside. Many big names retested their February lows in last week’s selloff. However, as earnings come in, traders can better separate the winners in today’s economy from those not faring as well.
That’s especially true in a competitive space like hardware. Hardware is more like a commodity than software, but a company that makes quality hardware can still stand out.
In the semiconductor hardware space, one standout is Advanced Micro Devices (AMD). The company reported that its server processor business more than doubled in the last quarter, a sign that they’re taking market share from other players.
While some areas like gaming might see a slowdown with the economy, the company is on track to continue being an industry leader.
Shares are up about 20 percent over the past year, but are still down about 40 percent from their peak back in November.
Action to take: Thanks to its growing business and declining share price, the company trades at its cheapest valuation in years at 21 times forward earnings. As long as double-digit growth can continue, shares should move higher in time. Shares don’t pay a dividend at this time.
For traders, the October $125 calls, last going for about $4.25, offer mid-to-high double-digit return potential on a continued move higher in shares. Traders may want to sell off on any spike higher in the coming weeks, given the market’s overall volatility.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.