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Advanced Micro Devices (AMD) just delivered one of the best quarters in its history, and the market sold it off anyway. Revenue hit a record $11.5 billion, up 50% from a year ago. Data-center sales more than doubled, and profit beat expectations as well. But surprisingly, AMD stock is down more than 5% since the earnings release. One would expect a dip in shares following a strong quarterly performance to have been caused by weak guidance. However, AMD's guidance for the next quarter also came in above Wall Street’s consensus estimate.
If almost nothing went wrong, why was AMD stock punished? The problem was not the quarter but the share price going into it. Shares had nearly tripled over the past year and were trading at roughly 90 times forward earnings. The stock was priced for perfection, and a strong quarter simply ended up not being enough.
