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, Inc. (NASDAQ:AMD) plunged 12% Wednesday, after the company turned in decent fourth-quarter results but offered disappointing forward guidance.
So what: Fourth-quarter 2013 sales rose 38% year over year to $1.59 billion, compared with analysts' estimates which called for sales of just $1.54 billion. Despite the revenue beat, however, AMD still only recorded inline adjusted net income of $45 million, or $0.06 per share. Gross margin also fell by one percentage point to 35% as AMD's low-margin console gaming business continued to forge ahead.
In addition, AMD stated that first-quarter 2014 revenue is expected to decrease 16%, plus or minus 3%, compared with an 11% fall forecast by analysts. Meanwhile, gross margin is expected to remain depressed at around 35%.
Now what: Shares of AMD don't look particularly compelling to me, trading at around 37 times next year's estimated sales -- and keep in mind those estimates are likely to fall once analysts have time to fully digest today's news.
However, I think investors would be wise to at least add AMD to their watchlists, considering it is faring significantly better than it was in the same year-ago quarter, when the company recorded a harrowing adjusted $102 million net loss. AMD still has plenty of work to do -- most notably in chipping away at its massive $2 billion long-term debt pile -- but could stand to reward patient long-term investors if it can continue marching toward sustained long-term profitability.
Fool contributor Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.