AMD, PayPal Tell a Tale of 2 Markets

After a tough January, the stock market has gotten itself back on an upward track in recent days. That upward trend looks likely to continue based on Wednesday morning's premarket activity. As of 8:30 a.m. ET, futures contracts on the Nasdaq Composite (NASDAQINDEX:^IXIC) were up more than 1.5%, as the benchmark continues to rebound from the worst of its severe correction over the past few months.

Even with the broad-based gains, however, there's still a split within the stock market between companies that are able to meet investors' high expectations and those that fall short. Both Advanced Micro Devices (NASDAQ:AMD) and PayPal Holdings (NASDAQ:PYPL) released their latest financial results, and the disparate moves in their stock prices show that investors are still looking at different segments of the market in very different ways.

AMD leads chipmakers higher

Shares of Advanced Micro Devices jumped nearly 12% in premarket trading Wednesday morning. The semiconductor company's fourth-quarter financial results showed continued strength in the chip industry.

AMD, PayPal Tell a Tale of 2 Markets

Image source: Getty Images.

AMD posted several new records. Revenue of $4.8 billion for the fourth quarter was an all-time high for the chipmaker, rising 49% from year-ago levels. That capped a strong 2021 with record sales of $16.4 billion and growth of 68% year over year. Moreover, bottom-line gains were even stronger, with net income for the quarter rising 76% to $1.12 billion and adjusted earnings per share coming in at $0.92, well above expectations. In 2021, AMD earned $3.44 billion, more than double 2020's total.

Moreover, AMD's guidance was highly favorable. The company expects first-quarter revenue to be 45% higher than year-earlier levels. For 2022 as a whole, AMD projected sales of $21.5 billion, up 31% from 2021's final tally.

AMD is seeing strength in nearly all of its segments, with data center revenue doubling year over year and cloud and enterprise adoption driving growth throughout the company. That bodes well for a company that's already benefiting from industrywide shortages, and investors are optimistic that good times will last throughout the coming year.

PayPal pays the piper

On the other side of the coin, shares of PayPal Holdings plunged almost 19% in premarket trading. The electronic payments specialist didn't give investors much to be optimistic about in its fourth-quarter financial report, especially as the company looks forward to 2022.

PayPal did manage to grow, but only at a relatively slow rate. Total payment volume on the PayPal network was higher by 23% to $339.5 billion. However, net revenue of $6.9 billion grew just 13% year over year. Profit performance was even more lackluster, with adjusted earnings of $1.11 per share up just $0.03 from the fourth quarter of 2020.

Moreover, PayPal shareholders didn't see what they wanted in the company's 2022 guidance. PayPal expects total payment volume to rise 21% to 23% on a currency-neutral basis, with sales rising 15% to 17% and adjusted earnings of $4.60 to $4.75 per share. That would imply just about no bottom-line growth whatsoever from its full-year 2021 adjusted earnings of $4.60 per share.

Many investors have been nervous about PayPal's slowing growth, especially in the wake of its losing its long-standing relationship with eBay. Today's numbers only confirm the challenges that PayPal faces, and shareholders are adjusting their expectations accordingly.

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