As bearish as I was on advanced micro devices, Inc. (Nasdaq:AMD), I can’t say that I saw the recent decline in AMD stock. AMD shares fell below $10 earlier this month, reaching a 16-month low in the process.
That’s not what I predicted. I argued for the better part of last year that I thought that the shares of AMD will remain stuck. The trading range, which basically runs between $11 and $13 seemed right — if the company can show some significant improvement in their growth potential. Indeed, I wrote a month ago that “below $10, the stock AMD gets more interesting.”
To the North of this level, advanced micro devices shares looks more interesting. The drivers of the bull case, in particular, the new line of products are still on the way. AMD better able to challenge industry giant Intel (Nasdaq:INTC) remains unchanged. There are long-term tailwind for the chip space overall, one of the main reasons why the field of bull run, especially after the elections.
The question is whether “interesting” is enough convincing. And there are real problems facing AMD. Cryptocurrency mining weakness and reports of serious shortcomings weighed the stock AMD. And I’m not quite ready to close these issues.
Still, back to $10 a few makes AMD more attractive. Support usually takes about these levels, which could bounce. I’m not 100% ready to jump on Board with stock AMD — but more aggressive investors can be.
The bull Case for the stock AMD
One of the reasons to buy AMD stock right now is that he was caught in the sector-wide downdraft. Indeed, stocks of chip in General, it seems, weakened. Whether it’s a trade war, fears or simply to assess problems, the securities Commission and the TEC. The floor. In idx. FD.(Data) (Nasdaq:data), better known as “SOX” is 6% over the last month. AMD’s stock has fallen 12%, Micron technology, Inc. (NASDAQ:MU). Even ambitious company NVIDIA (Nasdaq:nvda) was arrested about 7%.
AMD, meanwhile, aside from a quick drop to $9, see support hold around $10 support level that has held since Dec 2016. Net profit in the first quarter, next month can be a catalyst for growth, especially with expectations are likely fairly low at the moment. More importantly, in the long term, this still holds.
In the end, the new line of the company needs to stimulate growth in 2018 and beyond. Both CPU Ryzen and information EPYC center of the chips should allow AMD to challenge Intel. For all the hype about mining cryptocurrency and its contribution to the revenues of AMD in the market share of AMD, and if this income will continue forever. Now advanced micro devices shares fell in the period when the production demand increases. (Indeed, it would seem that the obvious trade on mining weakness will be a short program nvda, which has risen in the past year, 138%, and not to sell AMD, which is 22%.)
Meanwhile, AMD responded to the report about the vulnerabilities, which affects its shares in March, and said that the fix will be mainly based on the firmware updates. So two of the drivers of the recent weakness that are specific to AMD, it seems, is quite modest, at worst. The remaining sales can be attributed to the market shares of Chip — and shares of technology companies in General. If so, that is, of course, buying opportunity in shares of AMD.
Shares of AMD to buy?
Forced to choose, I would take the bull case at this point. AMD share is still a heavy short interest, almost 19%, and it is a trade that looks too risky at the moment.
Still, there are reasons for caution. Technically supported, but advanced micro devices is also relatively a 10-month structure of higher highs and lower lows. Evaluation, even at 19x in 2019 consensus earnings per share, not necessarily cheap. Chip stock space in General, as you know, are cyclical. AMD is still heavily dependent on PC, and long term weakness in that industry is one of the reasons I’m careful, and INTC.
The company AMD has outlined $0.75 in EPS in 2020. 20x multiple of those profits and stock value of $15. Discounted by 10% of the value of shares AMD at the moment above $12. The question is, 20x multiple on — and in AMD can hit those goals. If cryptocurrency mining weakness has some effect and it is likely, given the competition of ASIC — the goal is care. Taking into account the impact of the PC and the cyclical nature of the space, a few 20s may be too high. (Note that Intel is trading at under 14x.)
I think that there are likely up to AMD stock going forward, and perhaps short-term rebound if the market cooperates. I still doubt that along with legs is compelling. I think selling puts may be one of the ways to enter a part: Jan 2019 10 $put can be sold for about $1.50, which provides about 18% of the profits with the lack of ownership of the shares of AMD at an effective price of $8.50. From the standpoint of yield that the production pays off like the stock AMD moves about $ 12 — with less risk.
Buying AMD right not a bad trade, necessarily. I’m just not sure, but it will be good or that 10 $is not big price. It’s low enough to be intriguing. But given the potential impact of cryptocurrency and still-hefty valuation, I’m not sure this is quite enough to be convincing.
At the time of this writing, Vince Martin has no positions in any securities.