Don't Touch AMD Stock Unless You Hear Rumors Of A Sale

  • Dr. Lisa Su has failed to turn around chip maker, AMD.
  • AMD was a casualty of the PC downturn and has not had much better luck in graphics.
  • Avoid AMD stock, unless you hear a good rumor of a pending sale.

If you are studying the history of computing, then AMD (NASDAQ:AMD) is a great name to know. If you are looking for an investment, it’s a great name to forget. AMD was one of the great names of the PC era, usually making chips that did what Intel (NASDAQ:INTC) chips did, for less, but as the PC era ended, the lights went out. The last peak for the stock came 10 years ago when AMD neared $40/share, but it went nowhere once the recovery resumed, and fell recently below $2/share.

AMD stock chart

AMD stock price chart by amigobulls.com

The most recent AMD earnings release shows a company struggling for traction. AMD's losses narrowed to $102 million or 13 cents per share, on revenue of $958 million. This was a huge improvement over the $347 million lost in the same quarter a year ago, on revenue of $1.34 billion. But AMD's guidance was weak and the stock resumed its fall.

AMD had placed great faith in its new CEO, Lisa Su when she was hired in October 2014. Think of her as a hardware version of Yahoo's Marissa Mayer, a whip-smart female engineer who, it was hoped, could get growth going again.

Obviously, this has not happened. Su’s efforts at both diversification and simplification have met with failure. AMD is, in many ways, a dead stock walking.

AMD might be worth selling for its intellectual property, and Su’s hiring led to some speculation a Chinese buyer might be found. But it was her predecessor, Rory Read, who had the great Chinese connections – he left to take a position with Dell. Su has tried to compete with NVIDIA (NASDAQ:NVDA) in graphics but has not made the mistakes Mayer has, of getting into the public press with big parties or fancy clothes.

Since Su’s appointment AMD shares have fallen from about $2.75 each to their present level. The balance sheet now shows a debt-to-assets ratio of 3:4, and AMD's cash position is deteriorating. Only a few of the 23 analysts following the stock have it as a buy, and 18 have it rated as a hold.

It’s almost as if AMD has been forgotten.

If you hear a good rumor that the company is about to be sold, you might be able to make some money on AMD, because it needs to be sold. But there is no other reason, short of a sale, for there to be any optimism left about AMD. It is best left to history.

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Comments on this article and AMD stock

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harshal.patel.1
neutral
So your advice is to avoid until you hear a rumor of them bing bought?

2 3 reply
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myadonisdna
neutral
Great post, so much in depth analysis! I really hate when sites only write two paragraphs on a stock with absolutely no information to back it up but this was great.
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Do share this awesome post