The board of directors of the American chip electronics manufacturer AMD has prepared excellent news for investors: the corporation plans to buy back its shares. What does it mean when it happens, how did the quotes react – we are also eager to get answers to these questions.
AMD announces buy-back
On May 19, the official website of the technology corporation Advanced Micro Devices (AMD) announced the planned launch of a massive $ 4 billion buyback program.
When the program starts, there is no exact information yet. It is reported that the acquisition of shares may be suspended or completed at any time. The IT corporation’s securities will be bought out on the open market. The decision of the board of directors to conduct a buy-back was based on high financial indicators for the first quarter of this year.
AMD Q1 2021 Report and Future Projections
On April 27, the chip developer and manufacturer provided financial data for January – March this year. According to the published information, the amount of revenue in comparison with the indicator for the same period last year increased by 93%, reaching the level of $ 3.45 billion.
Net profit managed to grow by 242.6%, from $ 162 million a year earlier to $ 555 million. Cool, right? Earnings per share amounted to $ 0.45, which is 221% more than statistics for January-March 2020.
The company expects that in the current quarter, revenue will add another 4% and close to $ 3.6 billion. As for the forecasts for the year, the revenue is predicted to jump by 50% in comparison with the results of last year.
AMD shares rose in price
It is difficult to say that the news of the buyback of securities rocked the market and drove the quotes of the technology corporation to the ceiling. But let’s rejoice at what we have, because in the phrase “moderate growth” the main word is still “growth”.
On May 19, at the close of trading, Advanced Micro Devices, Inc. (NASDAQ: AMD) rose 2.4% to $ 76.23. A day later, the increase was repeated, and the price tag reached $ 78.06 per share. Since January, quotes have dropped by 14.9%, from $ 91.71.
Analyst Maxim Artyomov’s opinion on the prospects for the shares of the American chip manufacturer:
“Papers AMD over the past two sessions continue to grow amid news of buy-back. At the time of preparation of the material, after the test of the horizontal support level, the quotes bounced and reached the 200-day moving average. Its breakdown may become a signal for continued growth. In this case, the mark is $ 83.5.
Further, having tested the upper border of the descending channel, a rebound may occur, and another descending impulse may form. In this case, the price, having updated the nearest lows, will head towards the $ 70 mark. If the redemption of shares will add confidence to investors in the company, then one should not exclude the breakdown of the upper border of the channel and the continuation of the growth of quotations. The target mark in the future may be the level of $ 100 “.
Summing up the result
Strong quarterly earnings inspired AMD’s board of directors to launch a corporate buyback program. It is planned to spend up to $ 4 billion on this. The shares will be purchased on the open market. How long the program will last is not yet very clear. But the market’s reaction was not long in coming: the securities added almost 5% in price in two days.
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