Advanced Micro Devices, Inc. (NASDAQ:AMD) earned a quick boost late last month after the chipmaker reported its second-quarter results. It also turned out to be a temporary boost. AMD stock has plunged by about 18% since peaking on July 26, trimming its year-to-date gains to just 12%.
It certainly didn’t help that the analyst community piled on. For example, Goldman Sachs’ Toshiya Hari believes AMD shares are overvalued, and his price target of $10.60 implies another 16% worth of downside. In the report, Hari writes:
“However, Street EPS estimates are likely to remain largely unchanged, in our view, given increasing opex (low DD yoy growth for four consecutive quarters – incl. CQ3) and a step-function change in diluted share count (3Q guide: +10% qoq from 1,036mn in 2Q).”
Citigroup’s Christopher Danely also took a swing at AMD stock, noting that the “Ethereum (a cryptocurrency) mining related GPU gold rush is over.” His price target is an awful $5!
These analysts definitely have sound arguments, but I still believe the bull case for Advanced Micro Devices is intact. And I believe shares are poised for a nice growth spurt for the next couple years.
Here are three reasons why.
When Lisa Su came on board as Advanced Micro’s CEO in late 2014 — following two years at AMD, as well as stints at Freescale Semiconductor, International Business Machines Corp. (NYSE:IBM) and Texas Instruments Incorporated (NASDAQ:TXN) — Wall Street essentially yawned. The move looked like career suicide considering AMD’s long history of strategic blunders and seemed to be on the verge of oblivion.
But Su proved to be an outstanding leader who was more than up to the task. She swiftly cut costs, outsourced chip production and focused on product innovation.
Su’s background proved vital to the job. While she held executive positions at Freescale and IBM, she also is a skilled engineer with bachelor’s, master’s and doctorate degrees in electrical engineering from MIT, and she has authored more than 40 technical papers.
In other words, in Su, AMD stock holders got someone who could get her hands dirty.
At $12 billion in market capitalization, Advanced Micro Devices is a relatively small company compared to giants like $100 billion Nvidia Corporation (NASDAQ:NVDA) and $170 billion Intel Corporation (NASDAQ:INTC). Nonetheless, AMD has proven efficient in developing a multitude of product offerings.