Advanced Micro Devices (NASDAQ:AMD) has been caught up in the tech stock selloff. It’s bounced back somewhat, but at one point in early March, AMD stock had dropped 21% in just three weeks. Currently trading around the $79 level, shares in the company are still down nearly 20% from AMD’s 2021 high close. Opportunity knocking, or the wrong time to make a move?
There is some risk involved with AMD. A global recession would cut spending on PCs, for example. It’s also possible the competition rights the ship after several years of flailing. However, it seems more likely that AMD is going to have an outstanding year — see the reasons below.
If that prediction is correct, AMD stock at current prices is going to seem like a deal before the year is out.
Ryzen 5000 Mobile Processors
One of the key reasons why AMD stock performed so well in 2019 and 2020 was the company’s gains in the desktop PC market. The company hit a low point of 23.4% of the desktop CPU market in 2016. At that time, the future didn’t look all that promising. AMD had been losing processor market share for a decade and $6.50 would buy you a share of AMD stock. If only we knew then what we know now.
The launch of the company’s new Ryzen processors in 2017 marked the beginning of a dramatic turnaround. Built on AMD’s all-new Zen architecture, Ryzen immediately made an impression. By the second quarter of 2019, AMD accounted for nearly one third of the desktop PC processors. In the first quarter of this year, AMD’s Ryzen topped 50% of all desktop CPU sales, the first time that has happened since 2006.
The company has released mobile versions of its Ryzen CPUs for laptops, but the true game-changer didn’t arrive until the start of this year. The 7nm Ryzen 5000 mobile series has been hotly anticipated, and it has earned rave reviews. Here’s what PC World has to say about AMD’s hot new chip:
“Drop a Ryzen 5000 mobile processor into a laptop, and you end up with a machine that smashes expectations—a three-pound convertible can accomplish what yesterday’s six-pound gaming laptop did.”
Lower penetration in the laptop market has meant that up until the start of this year, AMD has only captured about 20% of laptop sales. Globally, laptops have been outselling desktop PCs since 2008. That means the company has been leaving a lot of money on the table.
However, the Ryzen 5000 mobile series shows every sign of being the catalyst that catapults AMD into a leadership position in the laptop market as well. Imagine what an additional 30% of global mobile CPU sales (to match its desktop market share) would do for AMD’s bottom line. And for AMD stock.
Game Consoles, Graphics Cards and Data Center
Other Advanced Micro Devices business units also have revenue growth potential in 2021.
The company just released its latest and most powerful PC graphics cards, the Radeon RX 6000 series. The PC gaming market surged during the pandemic, and shows no sign of slowing down. It’s expected that gamers are going to be investing in new graphics cards in 2021 in a big way. Even if AMD doesn’t gain marketshare, simply holding its own will have a Radeon graphics card revenue payoff.
The picture for data center and custom video game console chips looks even better. The company’s third-generation EPYC servers are claimed to be up to 68% faster than the competition. Meanwhile retailers still can’t keep the Playstation 5 and Xbox Series X — both equipped with AMD custom chips — in stock. In Q4, Advanced Micro Devices reported that revenue for that enterprise and custom chip business was up 176% year-over-year.
AMD also makes my list of stock that stands to gain from the growing Internet of Things.
Bottom Line on AMD Stock
It has a “B” rating in Portfolio Grade, so AMD stock isn’t a slam dunk. However, Advanced Micro Devices shares were top performers in 2019 and 2020. Everything is lining up to make 2021 a triumph for the company, led by a killer lineup of mobile computer processors.
On the date of publication, Louis Navellier had a long position in AMD. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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