Semiconductor giant Advanced Micro Devices, Inc. (NASDAQ:AMD) is about to release its first-quarter earnings report this afternoon. Consensus for the quarter stands at $986 million of revenue with EPS coming in at -$0.04. Following a share price explosion of 333% over the last year, prices pulled back slightly from a high of $15.00 to $12.31 in mid-April. Ahead of the print, here are five reasons to be bullish on this undeniably volatile tech stock:
- Ryzen, Vega and Radeon – There are quite a few things to look forward to here. First of all, AMD aims to begin shipping GPUs based on the Vega architecture from Q2’17- and strong demand is expected. Secondly, in terms of the Ryzen CPU launched in March (to generally positive reviews), AMD has a roadmap for resolving issues (such as the platform eco-system) while investors are also hoping that AMD will make inroads with Ryzen in the desktop processor market. Finally, the latest version of the Radeon Pro Duo (a Polaris-based graphics card capably of supporting virtual reality- VR) will be released in May and has the potential to outperform rival Nvidia’s VR graphics card offerin. Why? Well at the beginning of this month AMD made a savvy move when it purchased Nitero for an undisclosed sum. Nitero develops 60 gigahertz chips which could be used in wireless virtual reality headsets.
- Hedge Fund Activity – we can see that there is a positive sentiment on AMD from hedge fund managers with hedge funds increasing holdings by 701,000 shares in the last quarter. In particular Ken Heebner who manages the $2.25 billion Capital Growth Management fund increased the fund’s AMD holding by 438% to $61 million according to a filing made at the end of 2016. Since this date the holding has made a gain of 18%. Other big name investors include Andrew Law (Caxton Associates) and Joel Greenblatt (Gotham Asset Management). In fact hedge fund sentiment reflects the outlook on the stock from institutional investors as a whole (which includes hedge funds, pension funds, mutual funds, banks, insurance companies and asset management firms). Institutional ownership of AMD is now at 77% vs 50% a few months ago- a key signal of confidence in the stock.
- Market Opportunity – The total market size of gaming, datacenter, and immersive platforms is now worth an incredible $53 billion. In 2016, AMD generated $4.2 billion revenue which is expected to rise for full year 2017 to $4.7 billion. While this growth is impressive, the total size of the market reveals the full potential of AMD if it manages to capture a greater market share in these key areas.
- Top Analyst Opinion – Jefferies analyst Mark Lipacis has a very impressive track record on the stock of a 69% success rate and 59% average return according to TipRanks so his recommendations are worth following. Lipacis rates AMD a Buy with a $16 price target, which stands at a significant 20% upside from the current share price of $13.30. Lipacis has previously stated that he believes the stock pricing tactics and competitive performance will lead to AMD capturing some of the desktop, server and notebook markets from Intel.