In the stock market, short-term news often wins the day. For traders, a company’s forward guidance during earnings may be more important than earnings itself. However, over time, growing revenues and growing earnings should translate to a higher share price.
When a stock sells off on fearful guidance in the short-term, investors can look at earnings trends to determine if a stock is an oversold buy for the long haul.
This week’s earnings season is ripe with opportunities. Chipmaker Advanced Micro Devices (AMD) is one of them. The chipmaker sold off 10% after providing weak guidance despite strong revenues.
With revenues up 17% over the past year, AMD is still trending strong. And rising chip sales have translated into a 158% surge in earnings.
AMD has generally been running second in the AI chip race the past few years. The latest earnings suggest that won’t change anytime soon. But AMD is still better poised than many of its smaller peers for the quarters ahead.
Action to take: Investors may want to consider building a stake here, and use dips under $150 per share to add to it. AMD is still well-positioned to benefit from the continued growth of AI technologies, and growing earnings will tell that story more loudly than short-term guidance over time.
For traders, the January 2025 $160 calls, last trading for about $8.85, could see mid-to-high double-digit returns on a trend off the earnings-day drop in the weeks ahead.
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 company mentioned in this article.