Friday, February 21, 2014

Are You Too Emotional About Advanced Micro Devices (AMD)?

There is something about small cap chip maker Advanced Micro Devices, Inc (NYSE: AMD) that rightly or wrongly just brings out both the bulls and the bears. I should mention that we had an open position in Advanced Micro Devices in our SmallCap Network Elite Opportunity (SCN EO) portfolio from last summer up until late January when we locked in a small loss. We got out not because we have lost faith in AMD, but for sinking once again after its latest earnings report, something it had already done after three other earnings reports. But if you are not a trader and have a long term time horizon, holding the stock will probably bear some fruit and you should be considering the some of the following latest AMD news:  

Does Emotion Trump Reason for AMD Investors? AMD bear Richard Saintvilus has written another critical article about the stock for The Street, noting that:

"As I've said, this company has been in continuous recovery. It's time to ask: When will the ship finally dock?"

He went on to add that its "dangerous to assume" that AMD doesn't face significant pressure from the likes of Intel Corporation (NASDAQ: INTC) and NVIDIA Corporation (NASDAQ: NVDA) even if those companies are "shells of their former selves" because they've done moderately better than AMD in navigating the declining PC market. He also noted that while Apple (NASDAQ: AAPL) has partnered with Intel, there is no such "lifeline"  for AMD to the extent to "justify optimism" about the company's future. Moreover:

"I can't understand how AMD expects to emerge more competitive by not spending more in areas like research and development. Companies don't "save" their way to more revenue and market share. It costs money. The restructuring continues."

Is AMD Loosing Ground to Intel and Nvidia? According to market tracker Jon Peddie Research (JPR), GPU shipments increased in the fourth quarter of last year and during this three-month period, Advanced Micro Devices lost market share against rivals Intel and NVIDIA Corporation:

According to the numbers, AMD's overall units shipped dropped 10.4% while Intel's total shipments increased 5.1% from the third quarter and NVIDIA's increased by 3.4% compared to the third quarter of last year. With year-over-year numbers, AMD's market share slipped 5.4%, Intel's increased by 5.4% and NVIDIA's increased by 0.9%.

AMD Eyes New Growth Segments. Neil Spicer, who was recently promoted from senior sales manager for the EMEA component channel to head up the vendor's EMEA CPU business, has told Channelweb that the entry-level desktop PC market is on vendor's hit list as it predicts the start of the long-awaited upgrade cycle:

"We believe there is an upgrade cycle coming and these days everything is about compute power…It is unusual for a vendor to talk about costs. But there is an opportunity to build an entry-level PC from a starting point of around $70 [£42] with an APU and motherboard."

And he added:

"In 2012/13 we recognised 90 per cent of our revenue in the PC and client market, but by 2015, 50 per cent of the company's revenue will come from emerging growth segments such as consoles and we are moving to new designs in the tablet market…. The big thing for me is that the AMD you thought you knew is not the AMD we are today. We have been through the acceleration stage of our turnaround and are now in the transformation stage."

Share Performance. On Thursday, Advanced Micro Devices fell 0.81% to $3.69 for a market cap of $2.68 billion plus the stock is down 4.65% since the start of the year, up 36.2% over the past year and up 81.8% over the past five years:

Finally, here is a look at the latest technical chart for AMD:

Taking the above news in consideration, there is still plenty for both the bulls and the bears to contemplate.

SmallCap Network Elite Opportunity (SCN EO) has an open position in AMD. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.

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