Advanced Micro Devices Inc. (AMD) stock may seem overvalued due to high put options volume, but its strong free cash flow (FCF) and FCF margins suggest a higher price target. AMD is up to $260.40 today, despite recent tech sector dips post-Q3 earnings release. Unusual put options activity indicates short-term bearish sentiment.

Put options with heavy volume, such as the $252.50 contract expiring soon, suggest short-term downward pressure. Short-sellers of out-of-the-money puts could earn an immediate 1.09% yield. Despite the implied overvaluation, AMD’s recent earnings show a significant rise in FCF, with FCF margins expected to increase further with rising revenue.

With projected revenue growth, AMD’s FCF could hit over $7.5 billion next year, potentially leading to a higher valuation. Comparing to Nvidia’s FCF yield, AMD’s market value could increase by up to 31.2% or $307.27 per share. Despite short-term bearish signals, AMD’s long-term outlook indicates potential undervaluation and growth.

Read more at Barchart: Heavy Put Option Activity in Advanced Micro Devices Implies AMD Stock Is Overvalued