4 Reasons Why Advanced Micro Devices, Inc. (AMD) Stock Is Poised to Explode in 2017
Advanced Micro Devices, Inc. (NASDAQ:AMD) is being reborn from the ashes. And what a rebirth. In early 2016 stock prices fell to less than $2 per share as the company struggled to remain competitive in the face of giant’s like Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA). Fast forward a year and stock prices are now drawing close to $10 while its Polaris GPU is already succeeding in regaining some of Nvidia’s market share. Can the stock soar even higher? We think so.
Here are four reasons why the market should still be bullish on AMD:
- Ryzen CPU – the market is excited about the launch of AMD’s Ryzen CPU due in the first quarter of this year as Ryzen is expected to be able to outperform Intel’s high-end CPUs. This time both will run on the same process: 14 nm FinFET. And while Ryzen may be more powerful (in launch demonstrations, un-boosted at 3.4Ghz, Ryzen did slightly better than Intel’s 6900K 3.2-3.7Ghz with turbo) it may also be cheaper enough to give the AMD’s CPU a real competitive edge. This means that for the first time in five years we are now looking at an AMD product that can compete with Intel.
- Vega GPU – the update to Polaris, Vega has the welcome addition of HBM2 memory. It can beat Nvidia’s high-end GPUs. But there are reasons to be cautious. Rumors are swirling around the market that AMD’s consumer Vega GPU’s will now only be released in May 2017– much later than expected. This could be damaging because Nvidia’s GTX 1080 was already released back in May 2016 and its upgrade GTX 1080Ti (a real rival for the Vega) is due to launch before May 2017.
- Increasing Market Size – AMD is focused on the gaming, datacenter and immersive platforms markets. AMD has calculated that these three markets have an addressable market size of $15 billion (gaming), $18 billion (data), and $20 billion (immersive platforms). That’s a total of $53 billion. If AMD manages to compete with Intel and Nvidia then it is looking at a potential market share of $26.5 billion. And that’s without factoring in that these are rapidly growing markets which could each see annual growth of around 10%.
- Chinese Joint Venture – back in April 2016 AMD announced a potentially very profitable agreement to license its x86 chip technology to a new venture that it will create with Tianjin Haiguang Advanced Technology Investment Co. The new venture will utilize AMD technology to develop chips for server systems for exclusive sale in China. In return AMD should receive $293 million in licensing fees plus royalties from the venture’s chip sales.
Out of the 11 analysts polled by TipRanks (in the past 3 months), 8 rate AMD stock a Buy, 2 rate the stock a Hold and 1 recommends to Sell. With a return potential of 16%, the stock’s consensus target price stands at $11.30 compared to the current share price of $9.75.
Disclaimer: The author has no positions in the stock mentioned. This article is intended for informational and entertainment use only, and should not be construed as professional investment advice.