It seems like a few times a year AMD (NASDAQ:AMD) drops below $2, and I write an article telling people to buy it, and it then goes up. As of this writing it is $1.84, and at below $2 is always a good buy, although saying good bye after a nice profit is a viable strategy.
I have written many articles on AMD's long-term prospects, so I will not attempt to reiterate everything written in those articles. Suffice it to say, below $2, the reward far outweighs the risk. There will be many people who like to say how AMD is going out of business, but these people have been around for decades, and they have always been wrong. They will continue to be wrong, but to their credit it will just get more forceful and aggressive about it. Even so, the company stays in business, and has for almost 50 years.
Measure that against the possibility of it doubling. It has been over twice where it is now quite a few times in the not so distant past, most recently less than 18 months ago. It hit $3 a month and half ago, and not much has changed since then where it would sink so much. Then again, there was not much that made it rise to $3 either. But, that is how the stock performs. It takes very little, or nothing, to go up from sub $2 prices, after which time it generally sinks back if there was not a good reason for the climb. And, of course, there are always those takeover rumors that never come true, but boost the stock price substantially while people continue to believe them.
This is not to say AMD is necessarily a bad long-term buy. But I have found it more profitable to buy below $2, then trade it when it goes up on nothing, then buy it back. I always keep some, because I still think the company has some hope long term, but I'm not averse to selling most of it off after a nice increase.
There has been some news the last few days regarding AMD's technology, and the use of it, that might give some hints on 2016 and beyond.
Anandtech finally reviewed the Carrizo, a part we've heard so much about, but oddly have not seen tested until now. This gives us some insight into the part, with both some good and bad. For one, Carrizo does not even approach AMD's rhetoric regarding it, which calls into question AMD's veracity regarding Zen. It also is being put in systems that use it poorly, and with somewhat malicious pricing. For example, AMD's APUs are notoriously limited by the memory bandwidth, yet all the tested systems either had only a single memory channel or had only one memory stick, which forced it to run with one memory channel. The cost savings involved is relatively minor, whereas the performance impact can go from virtually non-existent to severe. Although games and other workloads that use the GPU would generally be the most severely hit, there are other purely CPU workloads that are crippled by only using one memory channel.
Most laptops do not have their memory upgraded, so even those with motherboards supporting two memory channels that are using one memory stick will be very unlikely to ever work that way.
When compared to Intel (NASDAQ:INTC) devices, AMD-based laptops did very poorly, unable to even show strong GPU performance.
This is an ongoing problem AMD has had, as it has been seen as a value brand, and often coupled with inferior hardware. Many times the associated hardware makes more difference than the processor, an example being an SSD compared to a hard disk. So, this is a real issue that has been plaguing AMD for years, and continues to. How AMD will shed its image as a low-cost provider is unclear if its partners continue to marry its processors to low quality hardware.
Even so, despite being crippled with one memory channel, and running at 15 watts using the same fabrication process, the Carrizo did outperform by a significant degree the 19 watt Kaveri. Of course, there were tests where Kaveri did better, being able to use 27% more power, and having much more bandwidth, but overall it did significantly worse. Also consider Carrizo is an SoC, so has much more on the processor die to consume that 15 watts, and you can see AMD's design improvement was considerable. But, stuck with an old architecture, and on a very old process technology, it is still not competitive with Intel's Broadwell or Skylake, even in the best of circumstances. This and the uncertainty of whether we will see proper hardware surrounding the processor both point to limited potential for this processor.
Even so, AMD did just announce wins for the HP (NYSE:HPQ) ProBook 645 and 655, and they are pretty nice computers. Unfortunately, HP does not seem to know much about them. I called to see if they were dual-channel (I'm almost certain they are, but wanted to see how well they knew the product), and was told it was 8-channel memory. After explaining this was not possible, I was told to call their tech support, and was given the number. I called, and the person there did not know, so he transferred me to yet another group, which ended up being the same group he was in. My experiment was complete - HP did not have this information easily accessible to buyers, even if one contacted them. So, I went to their website, and sure enough the opening page for it looked good, but then when one clicks "Shop Now", it tries to sell you Richland-based processors, which are obsolete. Click to enlarge
Clearly, HP is not supporting this product properly, although it finally has a nice screen and attractive storage options which include 1 TB hard disks and 256 GB SSDs. However, since the purchasing tool does not work, it is difficult to know what the prices for them will be.
Another positive report came from Tom's Hardware, which revealed some important information regarding the Fury's relatively high power use. Although Fury and Fury X did improve performance per watt considerably over AMD's prior GPUs, they were still not competitive with Nvidia (NASDAQ:NVDA) products, running current titles. Apparently, very early Fury GPUs required considerably more power than current ones, and by tweaking the power delivery parameters in software, the authors were able to dramatically reduce power, making it very competitive with Nvidia's GTX 980 in performance per watt. This is while running DX11 titles - this should prove even more favorable running DX12.
To sum it up, the stock is an easy recommendation, because below $2 it always pays off, particularly if you are willing to let go of it after a nice profit. For 2016, there are mixed signals. Carrizo does not even approach AMD's claims, although it is a solid improvement in low power scenarios compared to Kaveri. However, it is generally paired with inferior hardware and overpriced, so much so that one site questions whether there is sabotage going on. Even when it is paired with reasonably good hardware, as from HP, the company seems to know nothing about the product, and the website does not function properly when one tries to buy it. Clearly, AMD has problems downstream, even if it does a good job on its products. It is very difficult seeing 2016 as a good year in processors.
GPUs are different. The relatively poor power characteristics of AMD's high-end GPUs have largely disappeared, without even the major redesign scheduled for this year. With Windows 7 heading into obsolescence, and DX11 with it, DX12 and AMD's rapidly improving product offerings should help the company continue to regain market share in 2016. While we do not know how Nvidia and AMD will compete on FinFETs, it is certainly a positive to see AMD making significant progress with older designs, as it gives greater confidence in their competency.
But, the one overriding fact is, that at current prices, the downside is very limited, and it takes very little for the stock to go up significantly. I do believe the company still can do well long term, but it does not even need to at these prices. Something will send it up significantly, even if it is not true, and there will be an opportunity to sell it at a nice profit. It happens so often one has to wonder how it even gets this low on no significant news. But, it does, and we may as well take advantage of it.
Disclosure: I am/we are long AMD.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.