When Apple (AAPL) and chip supplier AMD posted weak results, the market initially sold their shares in after-hours trade. Lucky for them, general bullishness pressured FOMO traders to buy AAPL and AMD stock. Which of these stocks is a buy?
Apple posted Q4 EPS of $1.46 as revenue fell by 1% Y/Y. Still, the ~ $3 trillion firm reported a record in services revenue and stable iPhone sales. Shareholders are not concerned about the steady decline in iPhone sales. For now, its users are unwilling to give up on upgrading to an expensive device. At a P/E of 29x, Apple stock is by no means a safe investment. It will need investor confidence to outweigh the potential sales decline risks ahead.
AMD, which competes with Intel (INTC) in servers and PC chips, posted revenue of $5.8 billion, up by 4.1% Y/Y. Its client segment performed the best, as revenue grew by 42% Y/Y to $1.5 billion. AMd benefited from higher Ryzen mobile processor sales. In the fourth quarter, AMD expects revenue of $6.1 billion, below the $6.39B consensus.
The momentum in AMD and AAPL stock is an unusual reaction. Growth is not impressive enough to warrant the formation of an uptrend.
Be cautious on both firms, with Apple the better relative value play between the two.