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Advanced Micro Devices, Inc. (AMD) Stock Needs a Buyout

AMD stock is stuck in a range, with investors hoping for profits and traders hoping it will be sold

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Advanced Micro Devices Inc. (NASDAQ:AMD) has settled into a trading range as investors wait to see how its new chips do in the market. As far as AMD stock goes, the action has been downright boring, in fact.

Advanced Micro Devices, Inc. (AMD) Stock Needs News and Nothing Else
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The consensus estimates of the June quarter’s earnings, due out at the end of July, are for a small loss of 3 cents per share on revenue of $1.16 billion. That would represent a big improvement over the 8-cent loss and $984 million in revenues from the March quarter. But a loss is still a loss, and Advanced Micro needs to start making money now that its promises have become product.

Opinion on whether they can do this is divided.

AMD has nine analysts who call it a buy and five who call it an outright sell, with most calling it a “hold,” meaning … well, they don’t know what to think. What they do agree on is that AMD needs to turn losses into profit soon, if it is to keep their attention.

As a result, AMD stock has become rangebound after first-quarter earnings disappointed. A low of about $10 per share was put in early in May, and a high of nearly $13 per share was hit in early June. Shares are currently hovering midway between the two, at about $11.50 per share.

EPYC and Beyond

AMD offers Ryzen microprocessors and Vega graphics — high-end products that cost less than rival products from Intel Corporation (NASDAQ:INTC) and Nvidia Corporation (NASDAQ:NVDA).

They’re perfect for gaming PCs, which need high performance but whose users don’t have unlimited budgets. At the E3 game show, the company announced a supply deal with Dell’s Alienware brand, a key player in that space.

But it’s in servers where the company hopes to get profits. AMD’s new EPYC server chip specifications leaked out recently — the official announcement is due June 20. The figures look impressive, but Intel has 99% of this market with its x86 chips. Don’t buy the line that AMD can overcome that.

But if it proves it can keep up with Intel’s technology, AMD stock does become serious takeover bait, as I wrote earlier this month. A Chinese or Japanese buyer could give the company the capital boost needed to ramp up production, and AMD’s intellectual property would make Asia, in theory, independent of American suppliers.

Will the Wolf Survive?

Advanced Micro Devices has always lived like a wolf at the margins of a human encampment, feeding on scraps, always appearing ready for taming but somehow never advancing nor retreating.

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