Watch Out: Barbarians At The Gate For Advanced Micro Devices (AMD)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Advanced Micro Devices ( AMD) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Advanced Micro Devices as such a stock due to the following factors:

  • AMD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.4 million.
  • AMD has traded 20.3 million shares today.
  • AMD traded in a range 350.9% of the normal price range with a price range of $0.19.
  • AMD traded above its daily resistance level (quality: 57 days, meaning that the stock is crossing a resistance level set by the last 57 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on AMD:

Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. The company's products primarily include x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs), and semi-custom System-on-Chip (SoC) products. Currently there are 4 analysts that rate Advanced Micro Devices a buy, 4 analysts rate it a sell, and 10 rate it a hold.

The average volume for Advanced Micro Devices has been 12.5 million shares per day over the past 30 days. Advanced Micro Devices has a market cap of $1.8 billion and is part of the technology sector and electronics industry. The stock has a beta of 2.43 and a short float of 18.6% with 14.00 days to cover. Shares are down 13.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Advanced Micro Devices as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 800.0% when compared to the same quarter one year ago, falling from -$20.00 million to -$180.00 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's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 133.41 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 1.30, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.93%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 666.66% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ADVANCED MICRO DEVICES reported poor results of -$0.53 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings (-$0.23 versus -$0.53).

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