Today's stock market
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AMD scores a spot in the iMac
AMD investors have been on a roller-coaster ride in recent months. After a fantastic 2016, during which shares almost quadrupled, the market pummeled the stock last month following AMD's Q1 earnings report, sending it down 24% in a single day. Announcements made in concert with Apple's Worldwide Developers Conference on Monday have reinvigorated the stock, with shares jumping 13.6% this week, including 2.9% today.
For decades, AMD has been locked in a battle with Intel for market share of CPU chips, the "brains" of personal computers. But with growth in PCs seemingly at an end, the semiconductor battleground has shifted elsewhere, and no market is hotter than the one for graphics processing units (GPUs), the muscular superchargers needed for compute-intensive applications such as virtual reality, artificial intelligence, gaming, computer-generated imagery, and big data.
This week, AMD revealed new versions of its Radeon processors and announced that they will be shipping in updated 21.5- and 27-inch versions of Apple's iMac. In a press release, AMD Senior Vice President and Chief Radeon Technologies Group Architect Raja Koduri said: "It is incredibly satisfying to see the capabilities of Radeon Pro 500 series in elegant form factors and enabling amazing content creation, gaming and VR experiences. Radeon Pro 500 Series graphics are enabling new generations of makers with compute-accelerated creative tools and new APIs, bringing their imaginations to life in ways like never before."
AMD is focusing on lucrative opportunities at the high end of computing and has been making progress in battling Intel's dominance in server chips and high-end PCs. News this week provided some investor optimism that the company may take share from NVIDIA as well.
Ambarella falls on weak guidance
Shares of Ambarella, a maker of video processing chips, took a tumble today after the company announced first-quarter earnings Tuesday after market close. Good results were overshadowed by guidance for the upcoming quarter that the market perceived as weak. The company earned $0.07 per share, compared with $0.05 in the period last year, on sales of $64.1 million, up 12.2%. Non-GAAP EPS, excluding stock-based compensation and other items, was $0.39, compared with analyst expectations of $0.36. Revenue guidance for the upcoming quarter was $69 million to $72 million, whereas expectations were around the high end of that range.
Ambarella stock has a recent history of falling after earnings announcements despite beating expectations, and the pattern continued today, dropping 10.3%. The company has been fighting the headwind of slumping sales and high inventories of action cameras made by GoPro. But Ambarella is actually making good progress in diversifying away from its biggest customer, as CEO Fermi Wang explained: "Q1 revenue of $64.1 million reflects our continued push to diversify our markets and customers with strong growth in the quarter coming from IP security cameras, including both professional and home monitoring markets, and continued growth in other cameras markets including wearable and automotive cameras. While our current markets continue to expand, we believe the combination of video with computer vision technology will be the real driver of new opportunities in both our current markets as well as emerging markets such as OEM automotive and robotics."
The market has been tough on Ambarella in recent quarters, but long-term investors might start looking at the valuation, with the stock price only 13% above its 52-week low and a business that appears to be healthy.
Jim Crumly owns shares of Ambarella, AAPL, GPRO, and NVDA. The Motley Fool owns shares of and recommends Ambarella, AAPL, GPRO, and NVDA. The Motley Fool has the following options: short January 2019 $12 calls on GPRO and long January 2019 $12 puts on GPRO. The Motley Fool recommends INTC. The Motley Fool has a disclosure policy.