Why Advanced Micro Devices Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Advanced Micro Devices (NYSE: AMD  ) have plunged today by as much as 16% after an analyst downgrade.

So what: Goldman Sachs analyst James Covello dropped his rating on AMD from "neutral" to "sell," believing that the recent rally is overdone and shares will return from whence they came. Through yesterday's close, shares had gained a whopping 55% month to date, largely on hopes that it would benefit greatly from powering next-generation video game consoles like Microsoft's next Xbox, which is set to be detailed later this month.

Now what: Covello believes that investors are being to optimistic regarding AMD's gaming prospects, noting that similar gaming-related rallies have occurred in the past and subsequently faded. Continued weakness in the PC market would offset any upside related to gaming consoles. The analyst has a $2.50 price target, which implies roughly 43% downside and is around where shares were valued before May's sharp rally.

Interested in more info on Advanced Micro Devices? Add it to your watchlist by clicking here.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.


Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 16, 2013, at 5:30 PM, rav55 wrote:

    AMD plunged because Goldman Sachs analyst James Covello wanted to take profits. So he announced that AMD should be sold now so that everyone could share in the sell off without risk of having the stock go higher instead. Furthermore, this announcement probably came one the heels of a large short so they could make money while it went down.

    It's called collusion. And I think that the SEC should look into the timing of it..

  • Report this Comment On May 16, 2013, at 6:17 PM, rav55 wrote:

    Here is the scenario: AMD had been increasing recently in share value. Before the open on May 16th Goldman Sachs analyst James Covello announced that AMD's stock was too expensive and should be sold. Two things happened here; 1. There was a general announcement on the "street" that it's okay to sell so the price would not continue to rise and sellers would not lose additional gains. This smacks of collussion. 2. The stock was possibly heavily shorted in anticipation of the upcoming announcement to sell. When people have power, as demonstrated by Goldman Sachs analyst James Covello then that power needs to be mediated. And when the power gets exercised, then that use needs to be investigated. Was this announcement collusion to manipulate the market for a massive short? Who shorted the stock, at what volume and what is their connection to Sachs analyst James Covello. What was the timing of the short and the announcement?

  • Report this Comment On May 16, 2013, at 7:25 PM, rav55 wrote:

    To even suggest that AMD dropped due to techical or unforeseen reasons is ludicrous. This was market manipulation by Goldman Sacks. I wonder what their own short exposure was during this run up?

  • Report this Comment On May 17, 2013, at 10:34 AM, jpanspac wrote:

    The AMD fanboys never give up.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2436543, ~/Articles/ArticleHandler.aspx, 10/23/2014 2:58:08 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement