Recent tech stock earnings announcements led to some of the industry’s biggest names seeing their share price flip in an unexpected direction. This has left analysts trying to digest the newly released data to establish if sell offs on the back of good news can be put down to the catch-all excuse of “profit-taking”. There could be more to it, and those with existing positions or newbies looking to pick up the right growth stock might want to check out AMD.
US Tech Earnings So Far
21st April – Netflix – Some good numbers, especially relating to ex-US growth, but a big miss on subscription growth caused the share price to plunge 7%
27th April – Google – Parent company Alphabet reported stellar revenue growth of +34% year-on-year, and the share price surged 4%
27th April – Microsoft – Beat analyst forecasts and is successfully building its share of the all-important data centre market but MSFT shares still tanked by 3%
The sell-off in Netflix appears to be an overreaction. The firm now has healthy revenue streams, which will enable it to adapt and invest in solutions to the subscriber dip. It’s holding its own against stiff competition and will benefit from lockdown restrictions easing and allowing its production teams to resume making premium-grade content.
The search-engine provider is the tech stock that followed the orthodox approach to earnings season—good news leading to a share price rise.
The management must be wondering what they have to do. The firm posted its largest revenue growth since 2018, and the share price slid. Explanations are that the boost was temporary and centred on customers upgrading PCs and laptops during the lockdown. The growth in the Azure division “only” met analyst expectations of 50% year-on-year growth.
Two more of the FAANG stocks will share their Q1 earnings after the closing bell on Wednesday. Given the contrarian reaction to the news so far released, it will be interesting to gauge the response of Facebook and Apple investors.
It could be that investors in the most popular tech stocks are waiting for all the cards to be on the table before making their decision on what happens next. The alternative approach is to leave the uncertainty surrounding the more household names behind you and searching out easier to evaluate targets.
Chipmaker AMD has a market cap of $100bn and could offer investors more growth potential than the big names. It’s benefited from a surge in demand from locked-down gamers and server hosting companies. More importantly, it’s managed to maintain a robust supply chain of semiconductors while rivals have found those key components difficult to come by.
AMD expects revenue to grow by 50% in 2021 as it eats into the market share of its larger and less agile rival Intel. There’s plenty of room for more medium, and long-term growth as AMD currently has only 7.1% of the server market. It is a stock worth considering at any time, but possibly more so right now due to it having a share price that reacts as expected to earnings data. The stock was up 4% after Tuesday’s announcement, and momentum appears to be building.
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