Advanced Micro Devices, Inc. (NASDAQ:AMD) is definitely one of the names I’m staying away from at the start of the New Year.
2017 has been a great one for the market. Looking ahead to 2018, I see a lot of opportunities in stocks. The technology group in particular stands out as a strong investment — everything from blockchain, to artificial intelligence, to the Internet of Things excites me.
There are so many enticing opportunities available in this sector that it is actually difficult to decide which stocks to own. Determining which to avoid, however, is another story.
Conventional wisdom may suggest that AMD is overdue for a rally. The stock fell in 2017 while the S&P 500 is up nearly 20%, the semiconductor index has gained more than 40% and even the company’s stodgy, old competitor Intel Corporation (NASDAQ:INTC) is up 28% while still paying a decent dividend.
But, the turn of the calendar cannot save a laggard.
AMD Suffers from Stuck Shares and Too Much Competition
Here’s why I’m staying away.
First, while AMD continues to sign deals with big-name companies, we are not seeing that translated into a significant increase in revenue or earnings. Therefore, the share price is stuck. And the valuation isn’t attractive either. The stock is currently trading at 31.4X 2018 EPS estimates of $0.35. Even if the company can match expectations, the shares will still be trading at elevated levels.
The other big concern I have here is competition. There is the aforementioned Intel. And high-flying NVIDIA Corporation (NASDAQ:NVDA) is also giving AMD a run for its money.
It seems as though every time AMD starts to gain some ground, the stock fails to move with the news. The only catalyst that has been able to budge AMD recently was an upgrade on Monday by an analyst who had previously been bearish on it. That’s great and all, but I want to see a stock that moves on actual headlines, not the opinion of an oft-wrong analyst.
There’s always the chance that my opinion will change in the coming year. 12 months is a very long time and there may be a price at which I am comfortable buying AMD.
But for now, I’m staying away. There are much stronger stocks to add your portfolio as we kick off what I expect to be yet another strong year.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience. As of this writing, Matthew McCall did not hold a position in any of the aforementioned securities.