AMD Stock Analysis - When To Buy and When To Sell | Summary and Q&A

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January 7, 2019
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Value Investing with Sven Carlin, Ph.D.
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AMD Stock Analysis - When To Buy and When To Sell

TL;DR

AMD's stock performance has seen significant highs and lows, driven by product competitiveness and industry changes. It's important to carefully analyze AMD's products and stay informed about Intel's advancements before investing in the company.

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Key Insights

  • 🍻 AMD's stock performance is closely linked to the competitiveness of its products, particularly its CPUs.
  • 🦔 The technological advantage of using a smaller fabrication process has given AMD an edge over Intel.
  • 🥹 Intel still holds the best single-threaded performance, critical for gaming, giving it an advantage in that market.
  • 😘 Both companies will coexist and trade blows, but neither is expected to dominate the other in the near future.
  • ⌛ Investing in AMD requires a deep understanding of its products, industry shifts, and the ability to time investments based on Intel's product releases.
  • ⌛ Most investors should avoid AMD due to its complexity and the difficulty of timing investments correctly.
  • 🍉 Intel, with its stable financial performance and dominance in the market, is considered a safer long-term investment.

Questions & Answers

Q: How does AMD's financial performance compare to Intel's?

AMD's financials have not been impressive, with negative cumulative earnings per share and free cash flow. In contrast, Intel has enjoyed stable financials, with a high gross margin, increasing free cash flow, and dividends. AMD's advantage lies in not having to invest heavily in semiconductor fabrication, leading to reduced capital expenditures.

Q: What are the key factors to consider when investing in AMD?

Two critical factors to analyze when investing in AMD are the attractiveness of its product performance and any changes in product offerings by Intel. AMD's success is highly dependent on producing attractive and competitive products. Furthermore, if Intel introduces a significantly better product, it may be wise to sell AMD stock as it takes time for AMD to develop a competitive response.

Q: Why did AMD's stock price surge and then decline?

The surge in AMD's stock price was primarily driven by the release of its Zen microarchitecture in 2015, which introduced a competitive performance that attracted consumers. However, as the market caught on to the story and AMD's products gained traction, the stock's upside potential began to diminish, resulting in its decline.

Q: Should I consider AMD as a value stock?

Purely from a value stock perspective, AMD may not be a suitable choice. While it may show improved fundamentals and profitability in the short term, it does not have a long history of positive shareholder returns. AMD is more of a sentiment play, relying on product innovations to drive its stock price.

Summary & Key Takeaways

  • AMD's stock price has experienced a rollercoaster ride, driven by its product competitiveness and industry changes.

  • The performance of AMD's products, particularly its CPUs, is a crucial factor in determining its success in the market.

  • Intel's advancements and the competition between the two companies play a significant role in shaping AMD's future prospects.

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