This Company is Likely to Benefit from Several Major Catalysts — and Quickly

Even though Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is up about 14% for the year, there is still quite a bit of disappointment. In fact, lately the shares have been feeling more pressure. Since late July, AMD stock is off about 12% or so.

As with any company that is in the turnaround mode, there is certainly plenty of uncertainty. Besides, AMD has a long history of making blunders and strategic mistakes.

OK then, so what are some of the risks facing AMD right now? Well, here’s a look:

  • Competition: It remains fierce. AMD must fight against mega operators that have enormous resources, such as Nvidia Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC).
  • Heavy Selling: The biggest holder of AMD stock — Abu Dhabi’s Mubadala Investment — has been one of the most aggressive sellers. During early August, the firm dumped 40 million shares. And this came after March’s sale of 45 million.
  • Bandwidth: AMD is in the midst of multiple product launches, which are targeting various markets like gaming, cryptocurrency mining and cloud computing. In light of the company’s relatively small size and constrained resources, there is not much margin for error.
  • Analysts: There are several that are far from upbeat on AMD stock. Barclays PLC’s (ADR) (NYSE:BCS) Blayne Curtis recently reaffirmed his “underweight” rating and a price target of $9. And this is not even the worst one! Note that Citigroup Inc’s (NYSE:C) Christopher Danely has a dismal price target of $5 on AMD stock.

All this really does look grim, right? Definitely. But again, this is normal fare for a company in a wrenching transition. And for the most part, I think some of the weakness in AMD stock does provide an entry point for investors.

The main reason is the company is likely to benefit from several major catalysts — and quickly.

For example, there is the Ryzen 3 processor, which has already sparked revenue growth.

More importantly, the momentum is expected to continue for some time, as seen with the latest strong guidance.

Then there are several other chips that are in the early phases of gaining market penetration.

One is the Radeon Vega GPU, which is focused on sophisticated graphics computer systems.

Keep in mind that Apple Inc. (NASDAQ:AAPL) is a notable customer and has only high praise for the technology.

In a press release, the company said: “Radeon Pro 500 series graphics enable extraordinary computing experiences, including stunning gaming, immersive VR on select models, and fluid content creation with exceptional performance and support for GPU acceleration across a range of creative applications on the Mac platform, such as Adobe Premiere Pro, After Effects, and Photoshop and the Foundry Nuke, Mari and Modo.”

Oh, and there is also the Epyc chipset. This is targeted at the massive datacenter market. As a testament to Epyc’s standout features and competitive pricing, AMD has snagged marque customers like Hewlett Packard Enterprise Co (NYSE:HPE), Dell, Microsoft Corporation (NASDAQ:MSFT) and Baidu Inc (ADR) (NASDAQ:BIDU).

Bottom Line on AMD Stock
Over the years, AMD CEO Lisa Su has done a tremendous job in repositioning the company for growth. She has also accomplished this while reducing headcount and costs — which is certainly no easy feat.

Yet Su’s efforts have been more than just about smart business moves. She also leveraged her strong background in engineering. In other words, SU has a very good sense of how to develop the right technology roadmap.

Now, as for AMD stock, it is not realistic to expect the same blow-out returns achieved last year (the return was up over 300%). However, given that the company is poised to benefit from several megatrends of the technology industry, it still seems like a good bet that the shares could still produce gains that beat out the averages.

— Tom Taulli


Source: Investor Place