AMD Stock Analysis – Is Advanced Micro Devices Stock A Buy?

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Hello once again guys and welcome back To stock radar I'm so happy to have you Guys here and in this video we're going To be talking about AMD stock or Advanced Micro Devices it is one of These stocks I am most well known for Being an AMD bull and a lot of people Question me saying why am I believing in This stock why do I have my hard-earned Money invested in AMD stock now before I Get into that I just kind of want to Explain what my history has been like With this stock as far as being an Investor because I've learned a lot of Important lessons being invested in AMD Stock so I first got into this stock Back in 2017 I believe it was or Actually it might have even been in the 2016 when the stock was um I'll pull up A chart to remember exactly when it was But the first time I got into this stock It was 6.82 cents a share I think I Picked up uh 2 000 shares of that stock And I remember very quickly it went up To 7.51 cents and I said I got a nice Little profit here I'm going to take my Profits off the table and I had a little Short-term capital gain there on AMD and Then I think I picked it back up in the Low sevens and then I sold it again at About 50 or 60 cents higher and I can Remember shortly after that that is when The stock went right from like seven Dollars to nine or ten then down to

Eleven and so I was mad that I didn't Just hold on to the stock the whole time At that point I was swing trading it and Yeah I did have uh you know two nice Little trades there and made a couple Thousand dollars on those trades Um but you know had I just held on to That stock I would have pretty much Doubled or even tripled my money well Not tripled but the stock went from 682 To a high of around 15 so I would have Had a nice um gain there of over 200 Percent but I was swing trading and that Was my experience with that and then Into 2017 Um I was swing trading that stock Throughout 2017 I would buy about a Thousand shares and I was trading a one Dollar price move so if the stock went Down I'd buy it and then if it was up About a dollar I'd sell make about a Thousand dollars in short-term capital Gains I did that four times in 2017 so I Had about a four thousand dollar return On that swing trade but do keep in mind That because it's a short-term capital Gain it's taxed at a much higher tax Rate so that sounds good on paper but um I paid a lot of taxes on those capital Gains this year but then what happened Is I got greedy Um shortly after they reported their Third quarter earnings I bought in again At 13.69 a share because I was sure that

Was the dip and that was the bottom and As we know that stock has gone well Below 13.69 since then so I'm in at a 1369 cost basis so I am down on my Shares of AMD right now I made a lot of Money swing trading them but then I also Got greedy bought shares too high and Now I'm stuck with shares at 1360 9 but My whole mindset on AMD has changed in That period of time learning more about The company and keeping up with them And so this is a stock I'm going to be Holding on to now for a while at least Until my capital gains are long-term Capital gains and so I I plan on holding This stock into 2019 seeing where this Company goes I have confidence in this Company I have confidence in Lisa Sue And where they are heading and so I'm Not going to be swing trading the stock Anymore the only situation where I would Sell this we're going to talk about that Here is uh if this company was bought Out then oh I'd be selling that stock I'd be getting out of it and uh you know Having a party but other than that I'm Going to be holding on to AMD stock for The long run but anyways that's my Background on my AMD investment let's go Ahead and talk more about this so first Of all as we said the company is Advanced Micro Devices they trade under The symbol AMD it's a company that's Actually older than most people think

It's a 48 year old company now the type Of investment this is I'm still calling It speculative because they have just Now returned to profitability and the Future is largely uncertain for this Company it's kind of a company where They can either do really well or They're going to fall out of favor and They might go bankrupt so for that Reason that is why I call this a Speculative investment but as such it is High risk and high potential return Their p e ratio is currently at 285 Because they just returned a Profitability so we really can't use That metric but if you look at the Forward p e of 22 that's much more Reasonable but it's because they posted Very slim earnings it is their first two Profitable quarters so that p e ratio is A bit inflated and it's hard to get a Good idea of the valuation of this Company I certainly would not rely on That PE given the fact that they just Have a little tiny bit of profitability In the last two quarters and they have a Market capitalization of 11 billion Dollars so first of all what is AMD Advanced Micro Devices as a Semiconductor Company they're involved With computers they're involved with Graphics and visualization Technologies And they are currently edging into the Data center market so primarily AMD

Chips are involved in the electronics That we use the gaming systems they're Involved in our laptops and our desktops But they're also edging into the server Market and they do have potential Implications with low-cost embedded Ships as far as future Technologies go So AMD reports their revenue in two Different segments it's going to be Computer and graphics and then embedded Enterprise and semi-custom so as far as Their computer and Graphics segment goes That's going to be their desktops that's Going to be their notebooks and that's Going to be their graphics cards their Gpus that's the biggest segment that AMD Is seeing growth in right now and then As far as the Enterprise embedded in SOC Segment goes that's going to be their Servers that's going to be their Embedded chips their system on chip Processors and then gaming consoles that Is where those are lumped in so those Are the two segments that AMD separates Their operations into so as far as their Desktop CPUs go they have the ryzen line And then their high-end line is the Threadripper as far as the gpus go they Have the Radeon and the top end is that Radeon Vega and then as far as the Server Market goes those are under the Epic line the epyc line from AMD now We're going to talk about the actual Share performance later on when we do

Fundamental analysis of AMD but AMD had An insane Rally from 2016 to 2017 they Were up over 400 percent but in 2017 the Stock has been an absolute dog it's like The gas ran out and they've just been Flat and slightly declining uh since 2017. but let's go ahead and talk now About the pros and cons of investing in AMD stock why might you want to invest In this company and why might you want To stay away so first of all this is the Most competitive lineup of both graphics Cards and CPUs they have ever offered And so if it's going to work for AMD It's probably going to happen now if It's ever going to happen if this Company is ever going to be highly Competitive with Intel as far as price And performance and edging into the Server CPU market now is the time for Them to shine if it's going to happen The other thing is cryptocurrency has Been huge for AMD as I'm sure you guys Know people use the graphics cards in Crypto mining operations and so they've Pretty much sold all the graphics cards They've been able to produce there's Been a huge demand and on the the Graphics card market and this has been Huge for both Nvidia and AMD the other Thing is that they are having Significant growth in market share in Both the server CPU Market the GPU Market and then the desktop CPU market

So in the most recent quarter they had 2.1 percent growth in market share in Personal Computing 6.5 market share Growth in gpus and 0.5 percent market Share growth in the data center market Now I know you're going to say that 0.5 Percent sounds like absolutely nothing But that was actually AMD doubling their Market share of the server CPU industry So yeah that sounds like a very small Number but they doubled their presence In that market that just goes to show You how little presence they had because What they were offering was just not Competitive with what Intel had out There and the other Pro for AMD is the Fact that there is huge potential with Their embedded chips these are low cost Low energy chips and as I'm sure we all Know pretty much everything is involved With technology now everything has a Chip and everything is communicating With each other so this could be Possible applications involved with Autonomous vehicles they could design Chips for specific applications and so There's a lot of potential for these Low-cost low energy chips that AMD is Producing the other Pro for them is that If they can Edge into the server Market As far as the server CPUs go this is one Where they have virtually no market Share right now so this could be a huge Business for AMD in their epic server

Line if they're able to pull this off And what they are offering is very Competitive with what Intel has like we Said this is the most competitive lineup They have had in a very long time but The thing is with this it's going to Take a long time for them to regain Market share of the server Market Because they're not retooling these Servers as frequently and it's going to Take a couple of years for them to gain Substantial market share of the server CPU Market if they do have a competitive Product the other Pro is that this Company has returned to profitability And any fears of this company going Bankrupt are pretty much subdued and Finally they are a buyout Target for a Larger company and if the company is Bought out that would be a good day for All AMD investors out there but now we Are going to move on to the cons of AMD Stock and first of all we have to start With the fact that this company has been In a Perpetual state of trying to keep Up or catch up with Nvidia in Intel they Have never really been ahead of them They've always been the one that is just A little bit behind them and so a lot of People just see AMD as the catch-up Company will things change now I mean I Certainly hope so but a lot of people Have heard the same story from AMD Before about them offering Cutting Edge

Technologies and you know offering Things that are better than Intel and Then maybe they're better for a short Period of time but then what Intel and Nvidia come out with ends up being much Better in the long run so they've been In a Perpetual state of catch-up with These much larger companies second is The fact that the cryptocurrency market Is it sustainable that's a question a Lot of people have so we're assuming a Lot of these gpus that AMD and Nvidia Are selling is a result of the Cryptocurrency mining and if we saw the Cryptocurrency market collapse in crypto Prices bottom out would there still be Any demand for these gpus for Cryptocurrency mining so that is a big Question people have is is this a Sustainable business for them or just a Flash in the pan the other con for this Is that the stock has been absolutely Flat it's actually declined over the Last year and so as far as investors Diving into this stock and seeing that Price go up there's going to need to be A major Catalyst for people to buy into AMD because looking at the share price Seeing it flat over the last year that Is something an investor is just not Looking for that at that point is just a Uh a dead money for you where you just Have your money tied up in a stock That's not earning you dividends it's

Just sitting there and there were Certainly better opportunities available In 2017 to invest in than to have your Money tied up in AMD so the flat share Price is definitely not a plus for this Company another con is the fact that There were a number of security flaws That came out about both the Intel and The AMD CPUs I don't know a ton about Out that but I do know that there were Ways that people could potentially hack Into these chips and get your Information and the actual patches might Result in performance lags or a decrease In the performance of these chips Another con for AMD is that this stock Is incredibly volatile you see crazy up And down price swings on a regular basis With AMD and my problem with that is it Makes this not a great stock for a Beginner because volatility is something You should not be exposing yourself to If you're new to the stock market now if You're a Trader you love to see high Beta stocks you want to see a stock with Crazy volatility you want to trade those Price moves but if you're an investor And you're buying into a stock for the Long term and you're seeing that price Go up and down and up and down if you're Not seasoned with investing it can be an Emotional roller coaster for you I have Personally been down uh 20 plus percent On AMD in the past I'm probably down

About that now but I've been investing For so long that I'm not even phased by This I've been I've been bit by AMD in The past I just believe in this company For the long term I really don't care About the short-term price movements but For somebody who is new to investing if You don't have that sense of confidence And that experience with the market then You may be tempted to sell when it's Down and buy when it's high and really Do the exact opposite of what you should Be doing just because of your emotional Response to that volatility so because Of that high volatility and the high Beta I don't recommend Advanced Micro Devices as a stock for a beginner I Would stay away from that until you are Seasoned and you understand that um you Know prices can be very volatile in the Short term especially with tech stocks Like AMD another con for AMD is the fact That they are competing with Intel and Nvidia these are two very successful Very Innovative companies that have Deep Pockets and so it's tough to think about AMD really remaining competitive for a Long span of time because Nvidia and Intel just have so many more resources Available to them they might be able to Be price performance competitive for a Short period of time and really that's All we need for them to regain some Market share see that share price climb

But long term it's hard to say whether Or not they will remain competitive with These two very large very Innovative Companies with amazing amounts of Resources and very Deep Pockets the Other con for this company is they are In a cyclical industry that's affected Very much by seasonalities so people are Not out there buying new computers and Buying uh you know the gaming equipment And the different things their chips are Involved with every single day there is A large amount of seasonality with this Market and that has hurt AMD in the past So you're going to find with AMD they're Going to have some really good quarters And then some not so good quarters just Due to that seasonality and the fact That this is a cyclical industry and Then the other thing is that AMD has had A lot of very short runs there's some Exciting news that comes out about AMD You'll see the share price climb five or Ten percent and then fall flat right Afterwards there's just not enough gas In the tank to get AMD to break out Again above the previous highs it's just Um a constant state of excitement and Then disappointment Within AMD as far as The share price and that just comes from A lack of investor confidence because This is a story again that they've heard Before with AMD and then my final con is That AMD is in a position where they

Have to innovate or die I don't know What would happen to AMD stock if they Fell short again and retracted and Intel And Nvidia edged ahead I certainly would Not be investing in this company anymore I'd be getting out of it cutting my Losses and at that point you know they Would be pretty much heading for Bankruptcy unless they were able to Really do something substantial or Change their business this is pretty Much it for AMD they have to get ahead Here and return to being a profitable Industry leader but anyways guys that Wraps up the pros and cons of AMD now Let's go ahead and talk about the Barriers to entry or the mold for this Company and really it comes down to Three elements so first of all we have To talk about the technology companies Like Intel and AMD have thousands of Patents protecting their work and so That is a major moat or barrier for Other companies is the fact that if a Company was going to Edge into the CPU Market they're going to be stepping on The toes of either Intel or amd's Patents and so most people are just Going to stay away number two is the Startup costs involved with researching And designing CPU architecture it's a Very expensive business that a lot of People are not going to just want to go Out there and start again because they

Would also be stepping on the toes of Intel in AMD with their patents and Having to spend Millions if not billions Of dollars researching chips and third Is the fact that this is a very price Sensitive Market where consumers care Equally about price and the performance Of these chips so even if you did have a Very fast and amazing chip that's only Going to be great for the high end or Enthusiast Market most people care about What the price is for their laptop or Their work computer or their desktop and They're not going to be caring so much About it being the fastest computer they Want something that's going to be a good Bang for their buck so this is a price Sensitive Market but anyways guys that Wraps up the beginning of our analysis Here on AMD stock now we are going to Jump over and look at the fundamental Mentals for this company okay so now we Are going to take a look at the Fundamentals of Advanced Micro Devices And as always we are going to start by Looking at the assets so first of all we Can look and see that total assets Declined from 2014 to 2015 but increased Every single year since then at a rate Of 7.2 percent per year so between 2014 And 2015 was when a lot of the problems For AMD were coming up and they they Really ended up in a very poor situation And that is when we saw that stock price

Just fall to a point where it was almost Unbelievable how cheap AMD was uh just a Few short years ago but anyway we can See now that assets have been growing at A rate of 7.2 percent per year and total Assets grew 7.3 percent from quarter one Of 2017 to quarter four of 2017 so That's again consistent growth there With total assets now we also see here That cash and cash equivalence declined From 2016 to 2017 however we can can see That cash and cash equivalents grew 64.1 Percent from the first quarter of 2017 To the fourth quarter of 2017. so what We can gather looking at the total Assets here is that AMD is showing Steady growth in assets somewhere around Seven percent over the last three years With a growing cash pile so moving on Now let's take a look at total Liabilities so we can see that total Liabilities decreased from 2014 to 2016 And remained flat from 2016 to 2017. now What is worth mentioning is that total Assets grew 7.3 percent from quarter one Of 2017 to quarter form of 2017 while Total liabilities grew just 1.3 percent That is definitely a plus so what that Means is that asset growth significantly Outpaced the growth of liabilities over The last four quarters which means the Balance sheet is improving the long-term Debt has decreased every single year Since 2014 and long-term debt decreased

5.9 percent over the last four quarters So AMD is doing an excellent job at Paying off their debt especially the Long-term debt and as far as short-term Debt coverage goes we can see that Current assets have excellent coverage Of current liabilities at a ratio of 1.8 To 1 in quarter four of 2017. that is One of the best short-term debt coverage Ratios we have seen of all the stocks we Have analyzed here in stock radar so They are doing a great job with Improving that balance sheet and Reducing the debt load of the company Both long-term debt and short-term debt Is in their current liabilities so what We can gather looking at this is that AMD has been paying back long-term debt And the low debt load makes this an Attractive balance sheet and we can also See that asset growth is outpacing debt Growth which is again A Plus and the Financial situation for AMD has Significantly improved moving on now we Are going to look at cash flow from Operations as well as the annual income Statement looking at the total revenue Cost of Revenue and gross profit now It's important to remember that because AMD has a cyclical business it is Difficult to interpret cash flow from Operations because it fluctuates a lot Between quarters so the best way to look At this is to look at the annual data

And not get so caught up in the Quarterly data as it is more difficult To interpret this is not a business like A t where it's a subscription-based Business and they're getting the same Amount of Revenue every single quarter Their revenue is going to fluctuate Every quarter based on things like Seasonality and consumer shopping habits Uh you got to figure they're going to Sell more computers around back to School season and probably around Christmas and so there's seasonality That plays into their business and you Have to factor that in when you're Looking at numbers like this But what we can see here is that quarter Three and quarter four of 2017 resulted In positive cash flow from operations we Said that AMD has really just returned To profitability but because they have Just entered a profitable Zone it's very Difficult to interpret the financial Ratios when you look at the price the Earnings ratio it looks like it's Sky High but that is because they are just Now achieving profitability and it will Be easier to interpret these figures uh Down the road once they are more in a Profitable Zone as a company but what we Can gather here is that total revenue Increased 33.5 percent from 2015 to 2017 While the cost of Revenue increased just 20.4 percent so that is a very good

Thing to see here that means that total Revenue significantly outpaced cost of Revenue so they were able to obtain more Sales without spending more money Obtaining those sales which is a good Thing that means they're going to be Seeing an increase in their gross profit You always want to make sure that total Revenue is exceeding the cost of Rev Revenue otherwise they're spending more Money obtaining the same amount of sales Or in some cases fewer sales now that is Indicated by looking at the gross profit We can see that gross profit increased 82.7 percent from 2016 to 2017. moving On now we will take a look at the Liquidity ratios the profitability Ratios as well as the stockholders Equity now this is pretty scary but back In 2015 when AMD was in the peak of Their financial problems and business Problems stockholders Equity was in the Negative now we can see that Stockholders Equity has climbed 46.9 Percent from 2016 to 2017 and Stockholders Equity has improved in Every quarter of 2017. so really AMD has Had fantastic results over the last four Quarters as an investor I couldn't ask For anything more from this company but The success they're having and the Improvement of the balance sheet is just Not being indicated in that share price Investors are still fearful when it

Comes to AMD and I just think they don't Trust am MD to have a long-term Turnaround because they've been a Company in the past that has over Promised and under delivered and I just Think investors are not confident about This company as far as the financial Ratios go AMD has great liquidity ratios Indicating that the debt is under Control as we see here a current ratio Of 176 percent and a quick ratio of 127 Percent is fantastic and a cash ratio of 80 percent is very good as well if we Compare this to like the cash ratio of Disney I can't remember off the top of My head but they had a very poor cash Ratio so AMD has a lot of cash and they Have great coverage of their short-term And long-term debt so this is very good Numbers to see here in terms of their Liquidity uh the problem is when we look At their profitability ratios so because AMD has just recently returned to Profitability the margins are very poor Because they're barely profitable right Now so we see their operating margin is Around four percent right now pre-tax Margin of one percent profit margin of One percent but we do see that gross Margin is at an all-time high over the Last four years but as AMD begins to Turn a profit in these ongoing quarters In 2018 we should see those margin Numbers significantly improve and then

We have the stock itself and let me tell You has this been a disappointing ride For investors for 2017 and into 2018. so AMD had substantial gains from 2016 to 2017 in fact they climbed over 400 Percent it's unbelievable but if you Look at that chart there on the right we Talk about how AMD had a lot of Financial problems between 2015 and 2016. they did not have any competitive Products they were falling out of uh Favor they didn't have market share of Really at all the service CPU Market or The consumer CPU market and there was a Period in time when people were saying Maybe AMD will go bankrupt or maybe They're going to be falling off the S P 500 again uh so really they were in very Poor health and then Lisa Sue stepped in And really did turn this company around But a lot of the gains to be had with AMD were from back in 2016 to 2017 People who believed in this company Early on and it seems like AMD really Ran out of gas in 2017 and traded Laterally in fact it had a decline of 10.1 percent over 2017. now with a beta Of 3.25 that means the stock is Significantly more volatile than the Market this means AMD has been the Perfect stock for swing traders that is Actually what I was doing with AMD stock Throughout the early part of 2017 is I Was swing trading this stock and I did

Very well with that I don't swing trade AMD anymore just because I did get Caught up in a price that is higher than What it is now so now this has moved Into a long-term investment for me but As a swing Trader that's what you're Looking for you're looking for a very Volatile stock with explosive price Moves and it doesn't get much better Than AMD as far as those uh price moves Go if you look at the five-year chart You can see it's been up and down and up And down all all over the place this Year so there was a significant amount Of money to be made there as a swing Trader but the thing is despite the Fundamental improvements and the return To profitability the market is just not Confident about Advanced Micro Devices And a lot of it I think just comes down To the fact that this company has a long Track record of over-promising and under Delivering and the market really needs To see some substantial results from AMD As far as regaining market share of the Server CPU space in the in the consumer CPU Market until they really have Confidence and Advanced Micro Devices And then we might see some analysts Backing Advanced Micro Devices but They've just seen this story before and I think a lot of people just don't Believe it this time around it's kind of Turned into the boy who cried wolf here

With AMD over promising and then not Being able to deliver on that but I Certainly have confidence in AMD I Believe Lisa Sue is the perfect person To be in charge of this company and I Think they are heading to a great place And their fundamentals are improving it Just hasn't been represented in the Stock price just yet so really people Are on the fence about AMD right now now Some people think AMD is ready for a Breakout While others think it is ready For a breakdown and if you compare the Performance of AMD to the industry it is Absolutely terrible so the Semiconductors and semiconductor Equipment industry has returned 44.78 Over the last year while AMD stock has Declined 19.2 so anyone who held AMD Stock over the last year you lost about 20 percent and so investors are very Frustrated with this stock I think a lot Of people are eager to get their hands Out of this company and that's just Going to make it even harder for this Company to ever have a significant rally In the stock because people are going to Be willing to cut their losses and try To break even on the stock just because They're tired of hanging around and Holding on to this stock they were much Better opportunities to be had in 2017. Now as the underdog they have the most To gain as we've said before if you

Compare this company to Intel and Nvidia AMD certainly has the most to gain but They also have the potential to fall out Of favor and just be left in the past so Really uh it's hard to say where AMD is Going from here I'm certainly bullish on This company but there are a lot of AMD Bearers out there as well and now we're Gonna wrap up with some key financial Notes but I just want to mention before That that we are talking about how AMD Is still a bit of a speculation at this Point because this is a company that has Just recently returned to profitability For years they were not turning a profit And it was just a question of will they Be able to return a profit or will they Be heading to bankruptcy I think we can All say that bankruptcy is out of the Question now for AMD but it's just a Matter of how long they will be price Performance competitive with what else Is out there available you have to Understand that Nvidia and Intel have Much larger companies they have a lot More resources available to them and so It's hard to say whether this will be a Short-term Advantage they have or in Long-term advantage and so for that Reason I still call AMD a speculation But the fact that they have returned to Profitability is a plus for this company Definitely when I was investing in this Company it was still speculative when I

First got into AMD stock they were Trading at six dollars a share they were Not turning a profit and the turnaround Plans were unclear so that was Definitely more speculative and at this Point I would say it is less speculative But there is still a substantial amount Of risk involved with investing in AMD Stock at this point in time but let's go Ahead and look at some of the financial Results from their quarter four 2017 Earnings report we see that quarter four Revenue grew 34 percent year over year From the quarter four quarter of 2016 And annual revenue grew 25 percent these Are absolutely fantastic numbers to be Seeing here we see that AMD return to Profitability in 2017 with net income of Just 43 million which is next to nothing We know that computers and Graphics Revenue grow 60 percent year-over-year Primarily due to the ryzen lineup and The Radeon lineup and the Enterprise Embedded in SOC Revenue grew just three Percent year over year primarily due to The Epic server CPU but again we do have To understand this is a much slower Moving market and it's going to take a Lot of time for them to gain market Share in this market so it's going to Take a couple of years until we see any Substantial difference in uh the market Share and growth and revenue in this Segment and we also know that Microsoft

Azure and Baidu are testing out the Epic Server CPUs for different applications It's good to see large companies uh Testing out the CPUs for their Applications all you need is a couple of Big companies to be switching over or Adopting the Epic servers over the Intel Options and this could be huge for AMD As far as market share goes and we also See that the substantial growth was in The computer and Graphics segment and We're hoping to see more growth in the Future in the Enterprise embedded in SOC Segment of that business but anyways Guys that's going to wrap up our Analysis here of Advanced Micro Devices I hope you guys enjoyed this and I will See you in the next video

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