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Advanced Micro Devices: Time To Take The Plunge?

Dec. 07, 2018 5:36 PM ETAdvanced Micro Devices, Inc. (AMD)64 Comments
Achilles Research profile picture
Achilles Research


  • AMD's share price has corrected heavily in the last two months.
  • AMD should continue to see strong revenue growth and high gross margins, thanks to its well-received Ryzen desktop and mobile processors.
  • Shares are no longer overbought or oversold.
  • AMD's shares sell for a much more reasonable P/S-multiple after the correction and have a much better risk/reward.

The correction of chip maker Advanced Micro Devices (NASDAQ:AMD) opens up an entry opportunity for investors that believe that the company will continue to see strong revenue growth on the back of its critically-acclaimed Ryzen desktop and mobile processors. Advanced Micro Devices' shares have fallen ~38 percent from their September high and have a much more appealing risk/reward-combination on the sell-off. Shares are more reasonably valued on the drop and are ripe for a rebound.

According to the Relative Strength Index, or RSI, Advanced Micro Devices' shares are in technically neutral territory, meaning they are no longer overbought or oversold. Despite the correction in the stock market and especially in the tech sector in the last two months, Advanced Micro Devices are still up ~107 percent year to date.

Source: StockCharts

I think 3 reasons stand out why investors with an above-average risk tolerance might want to consider shares of AMD on the drop:

1. Investor Sentiment Has Turned Negative Because Of The Trade War

Investors' risk appetite has decreased in light of the tariff stand-off between the United States and China. Throw rising interest rates and surging bond yields into the mix and you have a recipe for bearish investor sentiment. The sell-off, which started in October, has had a particularly negative effect on tech stocks, including AMD, which have performed extremely well in the first nine months of the year. I see the current drop as nothing more as a healthy correction and buying opportunity from a sentiment point of view.

2. AMD Is In An Excellent Position To Grow

Advanced Micro Devices hit a home-run with the release of its Ryzen desktop and mobile processors for high-performance computing. Not only do the Ryzen processor chips drive AMD's revenue growth, but the chip maker also won 2018 Trusted

ChartAMD PS Ratio (Forward 1y) data by YCharts

This article was written by

Achilles Research profile picture
I am a dividend investor and look for undervalued investments in the stock market. I identify misunderstood and undervalued equity investments and hold those securities until their price approximates my estimate of intrinsic value. I am a long-term investor only. I am building a $100,000 high-yield income portfolio. I am running this portfolio as an experiment to see if long-term sustainable income can be generated from a diversified pool of high-risk, high-yield securities. I am willing to accept high risk in order to meet my performance goals.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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