As far as InvestorPlace contributors and tech stocks go, I’d have to consider myself a rank amateur next to the likes of Tom Taulli, Dana Blankenhorn and Josh Enomoto.
They’ve all covered Advanced Micro Devices, Inc. (NASDAQ:AMD) and AMD stock in March with opinions as varied as night and day.
Before I get into my reasons for suggesting a buyout is the only way to save AMD stock, let’s have a closer look at their opinions.
Cryptocurrencies Rock
Enomoto sees AMD in a positive light despite the company’s multiple flaws. He believes that AMD’s position in crypto-mining-centric GPUs — which generate 20% of the company’s revenue — is superior to its much-larger rivals and may provide the company with a get-out-of-jail-free card.
“When you start multiplying a GPU’s list price by a factor of six, you can see just how expensive mining can be,” Enomoto wrote on Mar. 27. “No wonder AMD-powered graphics cards were the top two most popular crypto-mining products last year.”
Despite its lousy fundamentals, he believes its edge in cryptocurrency mining provides AMD stock with the capability to bounce back from its 52-week lows.
One-Trick Pony
The problem, as Dana Blankenhorn sees it, is that AMD never seems to have enough products coming down the pipeline to properly diversify the company’s revenue streams.
Whether we’re talking Ryzen chips or Radeon graphics processors, AMD can’t deliver enough product to meet the demand for its hottest products, while simultaneously doing the work necessary to deliver other products in the future to sustain momentum, thus killing AMD stock.
As a result, Blankenhorn is left wondering if AMD’s best option is to sell itself to a better-capitalized business that can take the fight to its rivals on a sustained basis.
Access to Technology
Tom Taulli came right out and said it Mar. 13.
His headline was “Why a Buyout Makes a Lot of Sense for Advanced Micro Devices, Inc.”
His closing paragraph sums it up nicely.
“AMD does offer an affordable way to get a piece of some of the hottest segments of technology,” Taulli stated. “More importantly, chip players have already been ramping up their M&A efforts to consolidate the market. In other words, betting on a deal — say in the next year or so — does seem reasonable.”
Make no mistake, Taulli is bullish on AMD CEO Lisa Su and the progress she’s made sharpening the company’s focus while making it more competitive on a global stage.
Somebody, he reckons, has got to want her talent and innovation.
My Two Cents on Advanced Micro Devices
As I stated in the beginning, I’m not a hardcore techie, so my dislike for Advanced Micro Devices has little to do with the company’s technology and everything to do with its financial position.
In December, I explained my rationale for buying Nvidia Corporation (NASDAQ:NVDA) over AMD stock.
“While Nvidia’s forward 2019 price-to-earnings ratio is 31, or almost double AMD’s, Nvidia’s earnings work out to $4.0 billion in 2019, with 660 million shares outstanding, compared to $458 million in earnings for AMD in 2019, with 865 million shares outstanding,” I wrote. “I’m going to buy the stock with $4 billion on the bottom line every day of the week.”
What can I say? For me, everything leads back to the bottom line and cash flow. That’s why I’m on record stating NVDA stock will hit $350 before AMD stock hits $25.
Money talks, and you know what walks.
Bottom Line on AMD Stock
I finished my December article by providing AMD investors with a ray of light.
“Would I buy AMD stock at this point? No, I wouldn’t.,” I wrote. “But if you want to gamble on AMD being acquired in 2018, now’s about as good a time as any.”
Nothing’s changed in the three months since.
AMD stock is dead money until a deal happens. It’s that simple.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
