3 Reasons Advanced Micro Devices, Inc. (AMD) Stock Has Plenty More Upside

AMD stock - 3 Reasons Advanced Micro Devices, Inc. (AMD) Stock Has Plenty More Upside

Source: Matthew Rutledge via Flickr

Not long ago, Advanced Micro Devices, Inc. (NASDAQ:AMD) was considered a has-been. But of course, the rumors of the company’s death have been, well, greatly exaggerated. Consider that AMD stock has skyrocketed 600% during the past 12 months.

3 Reasons Advanced Micro Devices, Inc. (AMD) Stock Has Plenty More Upside

Now the company is suddenly part of the hot crowd of chip operators, such as Nvidia Corporation (NASDAQ:NVDA). In fact, AMD stock was able to outpace the company. After all, for the past year, NVDA stock has logged a gain of 220%.

OK, so what can we expect with AMD stock going forward? Can it sustain the gains?

I think so. Granted, the returns will probably not necessarily be in the triple digits. What’s more, you should expect quite a bit of volatility.

But for the most part, AMD stock still should catch lots of fire. Let’s see why:

Reason No. 1 for AMD Stock: Leadership

When it comes to the technology world, it’s critical that the CEO have the right blend of technical skills and business acumen. Just look at Steve Jobs at Apple Inc. (NASDAQ:AAPL) or Facebook Inc’s (NASDAQ:FB) Mark Zuckerberg.

So as for the case of Advanced Micro Devices, it looks like the company has a CEO who fits the bill: Lisa Su. Since taking the helm a couple years, she has been impeccable with her strategic moves and strong focus on disciplined execution.

But then again, she has the right background to lead a company like AMD. She holds a bachelor’s, master’s and doctorate degrees in electrical engineering from MIT. Oh, and she has authored over 40 technical papers. Yet along the way, Su has served at executive-level positions at companies like Freescale Semiconductor Ltd (NYSE:FSL) and International Business Machines Corp. (NYSE:IBM).

Reason No. 2 for AMD Stock: Product Innovation

Until recently, the phrase “product innovation” and Advanced Micro Devices were usually not used in the same sentence! The company usually had a vague product strategy and seemed more concerned about focusing on niche markets.

But all this has changed — and fast. For this year, AMD plans to launch three major product lines — all of which are targeting major market opportunities. Now, the details are a bit vague, but it does look like AMD will have standout offerings that should move the needle in terms of revenues and profits.

Consider that this week, AMD will officially launch three Ryzen chips for gaming systems. And for the highest performing one, the price tag will be half-off compared to a comparable chip from rival Intel Corporation (NASDAQ:INTC). Seems like a no-brainer that this will gin up lots of demand, right?

Definitely.

But the real traction is likely to come from the Naples line of chips, which will focus on the datacenter. Keep in mind that AMD has less than 1% of the market. In other words, there is tremendous potential for upside.

The good news is that Naples is also likely to have strong performance — in terms of speed and power efficiency — relative to INTC, which currently has much of the marketshare for the datacenter.

In light of the continued growth in cloud computing, there is likely to be plenty of demand for an alternative technology. Note that already, AMD has landed customers like Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Alibaba Group Holding Ltd (NYSE:BABA), which hosts 35% of the websites in China.

Finally, AMD plans to release a chip called Vega, which leverages GPU technology for cutting-edge categories like deep learning and AI (Artificial Intelligence). No doubt, this will mean encroaching on the turf of NVDA. Again, as with the server market, there will likely be many potential customers that would consider an alternative, especially if the pricing is right.

Reason No. 3 for AMD Stock: Momentum

True, it appears that much about AMD stock hinges on its product releases. And of course, these are far from guaranteed. Let’s face it, for a mid-size company like AMD, it will not be easy to manage the complexities of multiple offerings.

But it is important to note that the company has already shown an ability to execute — such as by beating Wall Street expectations. Take a look at the latest quarter. AMD posted revenues of $1.11 billion, up 15.4%. This was $40 million higher than the consensus forecast.

The guidance was also encouraging. AMD put out a forecast of revenues to range from $955 million to $1.02 billion. This not only beat the analysts’ projection of $964 but also implies an 18% growth rate, assuming that the real number comes in at the mid-point.

But of course, for the rest of the year AMD will continue to launch products at a torrid pace. So all in all, there will be many potential catalysts to keep up the momentum. More importantly, the company will be focused on some of the hottest categories of technology, which should mean quite a bit of buzz to pump up the valuation even more.

Tom Taulli runs the InvestorPlace blog IPO Playbook and is the author of various books, including Taxes 2017: Saving A BundleFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/advanced-micro-devices-inc-amd-stock-upside/.

©2022 InvestorPlace Media, LLC