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What To Do With AMD Following Massive Rally

Chris Lau, KAPITALL: Over the past month, shares of Advanced Micro Devices (AMD) are up 54.5% on convincingly above-average volume. Trading volume was approximately five-fold higher than the daily average. With no news big releases recently, investors are left speculating on why shares advanced so rapidly and so quickly. [Chris Lau called it: 2 Tech Stocks Under $3 to Watch After Markets Free Fall] 

Reasons for Rally

Some of the possible reasons for the rally include:

1.     Short-covering. Short float is around 14.3%, according to finviz.

2.     Bullishness was delayed following AMD’s design win as a chip supplier for next-generation Sony (SNE) console

Analysts weighed in on the rally. Wells Fargo cited stable product pricing for AMD’s processor and the launch of two high-end processors. The bank has an outperform rating on the company.

$1,000 Video Card

In the graphics segment, AMD has a Radeon HD 7990 that costs around $1,000. A recent review on the product notes that the card, in cross fire mode, performed better than its rival’s card, the NVIDIA (NVDA) GTX 690. The good performance comes with a cost: power consumption is 100 watts higher than the GTX 690.

The card comes with popular games like Bioshock Infinite, made by Take-Two (TTWO). IT also includes games made by Electronic Arts (EA), including Crysis 3 and Battlefield 3. In the last three months, shares are up:

After considering product price against 8 games bundled with the card, reviewers could not recommend the card.

Performance

Even after the recent rally, AMD shares are underperforming its competitors. AMD is down 52% in the last year. Intel is down 14% over the one year period, too, but NVIDIA is up 6%:

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