Advanced Micro Devices (AMD) Volatility Skew Suggest Upside Post Earnings
$Advanced Micro Devices(AMD.US$ is expected to release earnings on Jan 30, 2024 after the market closes (AMC).
Market expect a year-over-year increase in both the top and bottom lines, with earnings per share of $0.77 on revenues of $6.14 billion. AMD is anticipated to report Q4 results in line with expectations, but the company's Q1 guidance is expected to miss market estimates following Intel's (INTC) weak report.
We saw last week that semiconductor stocks declined after rival Intel's (INTC) gloomy forecast put a damper in the recent chip rally. Market would be focusing on demand for AMD's (AMD) MI300 AI chips, expecting AMD to raise its prior $2 billion sales forecast for 2024. AMD is seeking to compete with market leader $NVIDIA(NVDA.US$ with its MI300 chips.
From UBS comment that recent channel and customer checks, AMD (AMD) has a firm demand commitment for more than 400,000 MI300A/X units for 2024. We should be expecting to see AMD (AMD) continuing to gain share from Intel (INTC) in the personal computer and data center markets.
Technical is showing uptrend for AMD. This could be due to the growing demand for its new chips and also it had been trading above the 50-day MA period since its last reported earnings and guidance in Nov 2023.
Advanced Micro Devices (AMD) Last Reported Earnings
AMD last reported earnings on 31 Oct 2023 after the market close (AMC). AMD shares gained +9.7% the day following the earnings announcement to close at 108.04. Following its earnings release, 90 days ago, AMD stock has drifted +64.6% higher.
From the time it announced earnings, AMD traded in a range between 105.91 and 184.92. The last price (177.83) is closer to the higher end of range.
Estimated implied straddle for upcoming earnings is 9.3%. Based on what we see in the last reported earnings, it has gained 9.7% after it provided the guidance and it has move up by more than 60% since. I would expect AMD to move higher post earnings, but weakness in the semiconductor sector as seen in $Intel(INTC.US$ earnings need to be taken note.
Advanced Micro Devices (AMD) Post Earnings Movement
The options market overestimated AMD stocks earnings move 58% of the time in the last 12 quarters. The predicted move after earnings announcement was ±7.2% on average vs an average of the actual earnings moves of 6.6% (in absolute terms).
Advanced Micro Devices (AMD) Earnings Implied Volatility Crush
AMD's last earnings implied volatility (IV30) going into earnings was 52.8. The last time AMD released earnings, the implied volatility dropped to 41.8, resulting in an implied vol crush of 21%. 5 days after earnings, the 30 day IV was 41.4.
Average Implied Volatility Crush For AMD Earnings: 13%
Average 30 Day Implied Volatility 1 Day Before Earnings: 53.7
Average AMD 30 Day IV for the Day of Earnings: 46.6
Average 30 Day Implied Volatility 5 Days After Earnings: 49.4
Advanced Micro Devices (AMD) Post Earnings Announcement Drift
AMD share price has drifted up 64.6% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 3.3%. The current drift represents a positive 3.0 standard deviation move.
Current post earnings announcement drift: 64.6%
Historical average post earnings announcement drift: 3.3%
Historical post earnings drift standard deviation move: ±21.6%
Advanced Micro Devices (AMD) Volatility Skew
The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. The implied volatility for downside puts is decreasing relative to upside calls, then that suggests the market has already priced in for an upside move.
The Current Skew Indicator indicated that signal is Very Bullish for AMD.
Summary
Based on the technicals and volatility skew, AMD looks to have a bullish upside post earnings, but the recent semiconductors report by Intel need to be take note, as we will have to see if AMD sales demand for its new chips would be able to provide a better guidance for Q1 2024.
The Q4 2023 expectations might be able to be met, I would be monitor the price action closely for AMD, as we could see a slight pullback for us to take a quick scalp trade for profit.
Appreciate if you could share your thoughts in the comment section whether you think AMD would post a much better Q1 2024 guidance, this would have a very good price effect, which we have seen in Q3 earnings report.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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