Advanced Micro Devices, Inc. (NASDAQ:AMD) shares are, once again, experiencing some volatility. Shares in the semiconductor company are down from $13.62 on May 1 to the current share price of $11.04. Hurt by disappointing first quarter sales and valuation concerns, the stock has struggled to regain its former strength. Could this slip-up be a buying opportunity for investors? After all, the stock has made stunning gains from under $2 at the start of 2016 so AMD certainly knows how to carry off a turnaround. Bearing that in mind, here are five reasons not to give up on AMD just yet:
- Market Maker – after a multi-year hiatus, AMD is now managing to take market share from its much larger rival Intel (INTC) in the valuable X86 computing market. In fact, for three straight quarters in a row, AMD has now posted increasing share gain against Intel. The last time AMD achieved this triple share score was all the way back in 2010. Indeed, AMD has not seen its overall market share rise significantly like this since 2012. If we look at the actual percentages- in 2010 AMD had 45% of the market; this plunged to just 18% in the last few years but has AMD has now scraped back to a market share of over 20%.
- Strong Product Line Up – AMD actually has more products due to launch this year than Intel, which should help it maintain momentum going forward- and hopefully push its market share higher. For example, at its recent annual analyst day, AMD announced that it is launching the excitingly-named “ThreadRipper” desktop part for high-end desktop computers, which will have 16 cores and the ability to run 32 threads simultaneously. In respect of the Vega graphics card there will be “the enthusiast gaming platform, the machine learning platform, [and] the professional graphics platform very soon thereafter” according to AMD CEO Lisa Su. She revealed recently that these products will all be launched over the next couple of months. Once these products are available to mass market they could become an important revenue source.
- The Mega Vega – AMD are saying the Radeon Vega platform is “the fastest GPU in the world for data scientists and immersion engineers”. The professional-grade Radeon Vega Frontier Edition card is a 13 TFLOP behemoth that can hold its own in the competition against Nvidia’s GeForce Titan XP (12 TFLOP). Meanwhile the Radeon RX Vega GPUs will be better optimized for gaming and AMD’s chief architect has told gamers to wait for the RX release instead of the Frontier option.
- Naples Server CPU – the highly-anticipated Naples two-socket server chip, which has now been formerly called the “Epyc” is big news for AMD’s data center business. The new chip will have 32 cores, 64 threads, and 2 TB of RAM- meaning that it can outperform Intel’s Broadwell-EP-based Xeon E5 V4. . According to AMD’s CEO, data center is very important as she believes “the single biggest growth opportunity is really in the data center over the next five years.”
- Ryzen Roll Out – AMD’s market share is set to increase as the Ryzen becomes more widely available. Jim Anderson, the company’s head of its computing and graphics division, told analysts Ryzen desktops will be launched by all five of the top PC OEMS by the end of this quarter. There is also the Ryzen Pro for the business market and the Ryzen Mobile which will operate at half the power of the current chip and have a Vega graphics core.
The overall consensus rating on the stock from the Street is hold with 6 buy, 8 hold and 3 sell ratings published on AMD over the last three months. Partly due to the recent drop in share prices, the average analyst price target of $12.86 translates into a 16.5% upside from the current share price.
While there are reasons to be bullish on AMD, this is certainly not an investment for the faint-hearted. Indeed, the big short interest in the stock has stayed steady at around 15%.