One of the storied and unexpected reversals of 2013 was Advanced Micro Devices (NYSE : AMD), a computer processer company which was left for dead by all but the most ardent (and perhaps foolhardy) of Wall Street analysts during the third and fourth quarters of 2012. Comparing peak to trough during one of the most volatile periods in the company’s history, AMD shares lost 70-percent of valuation, sending the majority of shareholders into a frenzied panic. Early into the following year when bullish loyalists and dumpster-diving daytraders attempted to regain some footing in the marketplace, mainstream media pundits mocked the notion of a comeback. AMD? The has-been micro-processor? The Volkswagen Bug to Intel’s Porsche 911?
The jokes poured in while AMD gyrated in a declining trend channel during the first four months of 2013, hitting a high of $2.90 and a low of $2.30. It was swing-trading nirvana in one of the few Big Board names that offered 17-percent valuation shifts each month for the wily and the wayward to exploit. As it turned out, those that maintained an open and unbiased perspective benefited tremendously when the stock suddenly skyrocketed to $4.40 during a few insanity-laced sessions in early May.
No one was laughing when AMD registered a 69-percent leap over the course of a mere three weeks. Nor was this a flash in the pan as some now embarrassed analysts opined as a means to save face. True, the stock did tumble after exceeding the $4.60 threshold in July, eventually finding support at just above the psychological barrier of three-even. However, the bears’ mauling would end at that spot, giving way to a sustained rally that culminated in reaching a multi-year milestone at $4.80.
With a newfound and painfully earned respect, AMD seemed to be poised for an authoritative and complete recovery. Unfortunately for both the partisan and the bandwagoner alike, the party was halted before it really even began, as underlying global and domestic weakness at first stymied efforts at breaking near-term selling pressure, and the nightmare conditions that reverberated throughout the major indices in recent days veritably crippled any hope that the recovery would occur appreciably soon.
At this rate, the current price at time of writing (Oct 16, 2014) and its opening January price the year prior is only separated by a little over 4-percent. Nearly two years of give-and-take trading was wiped out in less than two months. The ramifications are staggering and not simply because the fundamentals are so poor, with AMD’s latest earnings report falling well short of the Street’s expectations in critical performance metrics. No, the velocity in which so many investors abandoned the core reasons to capitalize their initial confidence towards a struggling but reputable organization is frightening.
Of course, that will not prevent future contrarians and dumpster-divers from vulturing the blood that has been copiously shed on the alleyways of Sunnyvale, California, to where AMD calls home. And while there is some rationale in acquiring shares at “deeply discounted” prices (despite the terrible financials), serious caution must be urged. Today’s concession may be tomorrow’s lamentation. There’s no guarantee that the bleeding will cease here, and typically, a sentiment dive as what we have witnessed in the price charts begets further diving. Until the dust clears and some trading baseline is established, betting on a second comeback prematurely may have dire consequences.