NEW YORK (TheStreet) -- Shares of semiconductor business Advanced Micro Devices (AMD) surged 4.7% to $4.01 as of 11:56 a.m. New York time, after Wedbush Securities upgraded shares to "outperform" from "neutral."
Wedbush analyst Betsy Van Hees believes AMD's strong position in the gaming console sector will prove a boon for quarter-on-quarter earnings and revenue growth.
Shares opened the day at $3.87, after closing Friday trading at $3.83. The number of shares traded has exceeded its three-month average trading volume: 27.7 million shares have changed hands compared to its average 26.6 million.
TheStreet Ratings team rates Advanced Micro Devices as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate Advanced Micro Devices (AMD) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 300% when compared to the same quarter one year ago, falling from $37 million to -$74 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, Advanced Micro Devices' return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$35 million or 143.2% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 5.70 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AMD's quick ratio is somewhat strong at 1.13, demonstrating the ability to handle short-term liquidity needs.
- Advanced Micro Devices has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, Advanced Micro Devices swung to a loss, reporting -$1.59 a share vs. 65 cents a share in the prior year. This year, the market expects an improvement in earnings (-15 cents vs. -$1.59).
- You can view the full analysis from the report here: AMD Ratings Report
Written by Keris Alison Lahiff.