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Advanced Micro Devices, Inc. (AMD) Stock Has a Rocky Road Ahead

AMD stock has turnaround potential, but not much else

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Bottom Line on AMD Stock

After enough analysis, I usually find something positive to say about a company’s future prospects.  But with AMD stock, other than turnaround potential, I am really hard pressed to find a compelling investment story.

There is of course always some hope for Advanced Micro Devices. The rollout of the 14-nanometer chips gives AMD a better chance to compete with Intel. Its gaming business should continue to do well and grow, though again Nvidia is currently the stronger rival. There is also the potential for a development breakthrough to leap frog archrivals. But again, its R&D spend is woeful compared to either Intel or NVDA.

Finally, there is the potential for Advanced Micro Devices to be bought out by its rivals. It’s difficult to value the firm given it doesn’t generate much for profits or cash flow. AMD stock sells at a price-to-sales ratio of 2.6x, which is ahead of the market average of 2, but well below Intel’s ratio of 3x.  Nvidia’s ratio is currently off the charts at 9.4x, but does indicate either rival could pick up Advanced Micro Devices on the cheap.

I would take a pass on AMD stock, but it remains a solid candidate to track the developments in chip gaming and computing.

As of this writing, Ryan Fuhrmann did not hold a position in any of the aforementioned securities.

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