Should You Buy Advanced Micro Devices, Inc. Stock After Yesterday's Pop?

Improving cash flows and declining risks will continue to drive AMD stock higher.

Should You Buy Advanced Micro Devices, Inc. (AMD) Stock After Yesterdays Pop

Shares of Advanced Micro Devices, Inc (Nasdaq:AMD) continued to defy gravity, gaining more than 6% in yesterday's trade. The stock hit an intra-day high of $14.1, just shy of its 52-week high. AMD stock is up 632% in the last one year. AMD stock gained on the reports that its Ryzen 7 1800X processors could ship as early as March 2nd. Though the company later said that the exact date of shipment was a mere speculation, the Sunnyvale, California-based chipmaker repeated that it will start shipping Ryzen 7 1800X chips in the "early March" timeframe. There is a lot of hype around the next set of products to be launched by AMD, Ryzen series CPUs and Vega GPUs.

Why so much hype around the Ryzen launch?

Ryzen is an attempt by AMD to recapture its lost CPU market share from Intel (Nasdaq:INTC). According to reports, Ryzen chips are likely to be a much better value proposition than its competitors. It will be much more powerful at a much cheaper price. Ryzen prices are likely to range from $129 to $499 covering all market segments. These price points are much cheaper than Intel's offerings in the corresponding segments.  According to reports, Ryzen 7 1700X 8 core CPU which will be priced at $499 "outperformed every other CPU in 5 out of the 8 tests. Including Intel’s fastest 8 core chip, the $1099 Broadwell-E i7 6900K". Such aggressive price and performance combinations will definitely be a strong attraction for customers. While some part of the Ryzen launch is already priced into the stock, AMD stock is likely to rally on the actual launch. Apart from Ryzen, AMD stock still has other catalysts such as Vega GPUs and improving fundamentals.

It's not all hype and speculation.

While hype and speculations have definitely contributed to the massive rally in the AMD stock, the main reason behind the run is the company's improving fundamentals. In 2015 AMD's financials were in a bad shape. AMD's revenues declined by almost 30% while its net losses shot up by almost $646 million. Shareholder value was -$412 million at the end of 2015. AMD had a huge debt burden with interest coverage ratio slipping into negative territory. The company was rapidly losing market share to its competitors and there were no new launches to look forward to. AMD stock had lost around 70% since the end of 2010 to September 2015. With all the gloom around, AMD stock was priced for bankruptcy. AMD stock was trading at a PS (ttm) of 0.3.

1 2
View single page >> |

Disclosure: Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.