Last year, Advanced Micro Devices, Inc. (NASDAQ:AMD) was flawless, as its shares soared from $2 to $11.30. But things have been much different in 2017. AMD stock seems more like its former self, sputtering along.
For investors, this is even more discouraging as rival NVIDIA Corporation (NASDAQ:NVDA) has continued to post robust returns. Note that the shares are up about 102% so far this year. In fact, many chip operators have rallied.
So what’s going on? Well, the turnaround at AMD has been choppy. It also does not help that the company has a long history of disappointment. Often prior recoveries have been short-lived because of the competitive environment.
Oh, and something else: The AMD stock price is far from cheap. Consider that the forward price-to-earnings ratio is about 32X.
OK then, so what to make about AMD stock price? Can things get back on track? Well, I think so. And to see why, let’s take a look at three key factors.
Bullish Reason No. 1 For AMD Stock: Intel Combo
By far, the most threatening nemesis for AMD has been Intel Corporation (NASDAQ:INTC). The rivalry has gone far back as the 1970s. It’s actually almost a miracle that AMD has survived.
So this is why the recent deal between INTC and AMD is so interesting. (It’s the first time the two firms have entered a partnership since the 1980s.) Both companies will develop a sophisticated laptop chip for the gaming market, which will include an INTC processor and an AMD GPU.
No doubt this could be a nice revenue generator. Let’s face it, gamers would love to have a laptop that provides for immersive experiences. It is also important to note that AMD is expected to launch Ryzen chips for ultrathin laptops by the end of this year.
And finally, AMD should benefit from the massive distribution footprint of INTC. According to InvestorPlace.com’s Luke Lango: “This is huge news for AMD. The partnership gets them on the right side of a shifting trend at essentially no cost to its current business.”
Bullish Reason No. 2 For AMD Stock: Long-Term Growth
During the past couple years, AMD has launched a multitude of products — all targeting massive market opportunities. But as should be no surprise, it has taken time to get traction as the company has had to deal with the inevitable long sales cycles.