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Head of Shareholder Exit of Advanced Micro Devices (AMD)



AMD (AMD) sold more than 4% on Tuesday, after the company agreed to acquire Xilinx, Inc. (XLNX) for an all-stock transaction for $35 billion, which is expected to be completed by the end of 2021. In the optimistic third-quarter earnings report for 2020, the chip manufacturer’s earnings per share were US$0.41

, higher than the expected US$0.10. Revenue increased by 55% year-on-year to US$1.8 billion, which was more than US$200 million higher than market consensus.

Important points

  • After AMD shareholders stated that they would acquire Xilinx in an all-stock transaction, AMD shareholders withdrew from the market.
  • As Intel Corporation (INTC) reported weak earnings, AMD’s sell-off gave up gains.
  • If it breaks below the support level near $80, it may quickly fall to mid-$60.

The acquisition will expand the company’s high-performance computing space product portfolio, but the response may indicate that AMD has paid too much for a company that underperformed throughout 2020. Xilinx rose 8.6% after yesterday’s press release and maintained a market value of $30.5 billion. Wall Street has a poor rating on the company, and its “hold” consensus rating indicates a mixed long-term outlook. This issuance will require a second issuance to increase the 1.17 billion shares currently issued by at least 250 million shares.

Due to system delays and poor management of Dow components and rival Intel, AMD has risen to a record high this year. The stock peaked in September and entered an intermediate correction, giving up about 20% of its value, and then rebounding slightly to October. Investors hope that last week’s dull Intel earnings report will push AMD to rebound to highs, but these gains have now subsided, and the stock is testing last month’s lows.

After the news came out, Barclays upgraded AMD’s rating to “overweight”, but Wall Street is more cautious about the long-term prospects in recent months, and reached according to 13 “buy” and 10 “hold” recommendations Consensus of “medium buy” was reached. An analyst now advises shareholders to make a profit and turn to a wait-and-see attitude. The current price target ranges from a low of $62 to a high of $120, and AMD’s transaction price is about $10 below the median target.

Market value It is the total market value of the company in U.S. dollars. Since it represents the company’s “market” value, it is calculated based on the current market price of its shares and the total number of outstanding shares. It is often referred to as “market value”, where “market value” means capitalization-a financial term used to indicate the size of a company.

Daily Chart of Advanced Micro Devices (2018 – 2020)

TradingView.com

AMD stock finally completed the round trip to the 2000 high of $40 in January 2020, and traded sideways at the new support level for six months, then rebounded to a strong upward trend, thus completing September Elliott impulsive wave. A few weeks later, the index fell back to the 50-day exponential moving average (EMA) and tested that level, and then a moderate rebound recovered two-thirds of the previous decline. It was launched about three weeks ago and is now being tested for support for the second time.

The Balanced Volume (OBV) cumulative-distribution indicator hit a new high in August, about four weeks above the price, and hit a two-month low in September in the distribution wave. Prices rebounded in October, but reversed again, in favor of the test of previous lows (red line). If the price rebounds or falls before the price increases, it will provide guiding clues for future transactions.

The bulls are still in control, but they need to be here to establish a more dynamic recovery effort. Time is running out, because the long-term relative strength reading is close to a sell signal and may continue until the first quarter of 2021. The US$50 moving average at US$80 was a clear turning point for the conflict, and a downward breakdown would cause the 200 to drop the daily EMA in the mid-1960s.

One Pulse wave Mode is a technical trading term that describes the strong trend of financial asset prices and is consistent with the main direction of the underlying trend. It is often used to discuss Elliott Wave theory (a method for analyzing and predicting price changes in financial markets).

Bottom line

Since the acquisition news triggered a sell-off, AMD stock has tested intermediate support for the second time since September. The stock needs to be maintained at this level, otherwise there is a 15-point downside risk in the short term.

Disclosure: At the time of publication, the author did not hold any position in the aforementioned securities.


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