Quo Vadis AMD: Too Good To Be A Bad Investment

May 13, 2020 12:40 PM ETAdvanced Micro Devices, Inc. (AMD)64 Comments
The European View profile picture
The European View
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Summary

  • Currently, AMD has again reached a point where it was before the COVID-19 volatility.
  • There is also the question of how to proceed with the share price gains. It is clear that there is no unlimited growth. The P/E ratio is also quite high.
  • However, I think that marketing timing at AMD is the wrong way to go. Investors need to put the high P/E ratio into perspective.
  • The excellent balance sheet and operating performance also underline that (further) share price increases are justified.

In my February article on Advanced Micro Devices (NASDAQ:AMD), "Don't Confuse Stable Foundation With Eternity," I pointed out that there is no infinite growth for AMD without more sensitive setbacks. COVID-19 has brought precisely this setback. Since I recommended investors to repurchase AMD in April, the stock has gained almost 30 percent. Investors are now facing a difficult phase. Between partial market opening after the lock-down measures and the possibility of an economic downturn that has just begun, questions about the fundamental valuation of AMD arise. Quo Vadis, so where do you stand on AMD? Time for some more profound thoughts.

Trading AMD has been a safe game lately

AMD's share price performance (like the market as a whole) was quite volatile. Currently, we have again reached a point where AMD was before the COVID-19 volatility.

ChartData by YCharts

At that time, however, I had already warned investors that further growth was not necessarily guaranteed. One main reason for my rating was the fact that I did not like the high valuation of the company. Accordingly, I have often given AMD a neutral rating (plus because I am not invested myself).

Therefore, it would only be logical for me to issue another warning, and for investors to wait for a better time to enter the market.

Market timing is a bet with bad odds

The thing is that this form of market timing may work from time to time, but overall it is a bet with poor odds. Of course, prices may fall again and create better investment opportunities. However, the question is whether this is guaranteed or whether investors will miss out on further price increases and thus possible profits. There are also good reasons to believe that speculating on AMD is the wrong way to go and that holding it over

ChartData by YCharts

ChartData by YCharts

ChartData by YCharts

This article was written by

The European View profile picture
12.97K Followers
Runner of the TEV Blog | Lawyer For Competition Law And Antitrust | Private InvestorI am a long-term oriented investor and in my early thirties. I hold a law degree and a doctor in law and love investing and talking about my and others' investments. I regularly write about my research and investments on various investor platforms and on the TEV Blog. Living and working in Europe in an international law firm as a lawyer for antitrust & competition, I may have another view on American companies, especially when it comes to the reputation of a company or possible alternatives here in Europe. Hence, I try to build a diversified portfolio not only with American blue chips but also with smaller and maybe hidden European Champions. Given that, I am very sensitive and close to the political and economic fundamental environment in Europe. My readers benefit from this. When it was foreseeable that Qualcomm would be fined by the European Commission, I calculated the exact amount in advance and was able to inform my readers about it. The same applies to the European Commission's first interim measures against Broadcom, which were the first in two decades. Furthermore, I was the first analyst (to my best knowledge), who predicted without any doubts a dividend cut by Deutsche Telekom. **My articles represent my opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions.**

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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