Why AMD Is a Must Buy Stock

Advanced Micro Devices (AMD) announced first quarter ended March 26, 2016 total revenue of $832 million, down 13 percent sequentially from $958 million in fourth quarter of 2015 and down 19 percent year-over-year from $1.03 billion in the first quarter of 2015. Going forward, AMD estimates second quarter of 2016 revenue to grow in the range of 12% to 18% sequentially.

AMD declared first quarter of 2016 non-GAAP net loss of $96 million or $0.12 of loss per share compared to a non-GAAP net loss of $79 million or $0.10 of loss per share in fourth quarter of 2015 and a non-GAAP net loss of $73 million or $0.09 per share in first quarter of 2015.

The graphics technology major reported continued sequential and year-over-year decline in both its top and bottom lines mainly due to weaker semi-custom SoC sales and weaker sales of client notebook processors and semi-custom SoCs.

A closer look at the business  

AMD is believed to have a superior financial position with no near-term debt maturities till March 2019 and having 7.2% of weighted average interest rate term debt until March 26, 2016.
AMD reported consolidated ABL borrowing worth $230 million which is flat sequentially by the conclusion of first quarter of 2016. AMD’s near-term financial objectives include, a solid year-over-year top line growth coupled with cash increase in the range of $600 million to $1 billion. The total operating expenditure is estimated to remain somewhat constant with growth in R&D expenses while SG&A decline. In addition, AMD targets on returning to adjusted operating profitability during the second half of fiscal year 2016 while delivering notable operating cash flows during the year.

AMD strategically unveiled the advanced Polaris architecture-enabled Radeon™ RX Series of next-generation graphics cards that is expected to offer a variety of future-proof superior gaming technologies along with highly smooth VR experience. Also, AMD uniquely introduced the innovative 7th Generation of AMD A-Series mobile Accelerated Processing Units (APUs) that illustrate key enhancements in performance as against the earlier generation that include significant performance improvements in gaming, file compression and video rendering. Importantly, AMD launched its superior-performance and advanced x86 processor core referred to as "Zen" that powers a "Summit Ridge" desktop processor, featuring sixteen threads and eight cores.

The industry-leading technological innovation delivering capabilities of AMD is expected to drive sustainable long-term company growth, being supported by an attractive cash-rich financial position with minimized total debt.

Innovative moves

The key graphics technology major is impressively advancing from “Bulldozer” Core developed in 2012 to “Excavator” Core in 2015 to “Zen” Core in 2016 and finally, to “Zen+” Cores beyond 2016. Therefore, AMD X86 Cores are driving superior competitive performance with “Zen” Core expected to be delivering 40% additional instructions per clock and thus, skyrocketing performance. “Zen” Core deliver a completely new superior-performance core design with Simultaneous Multi-Threading (SMT) for advanced throughput, smaller latency cache system and innovative superior-bandwidth, highly energy-efficient FinFET Design advances to Enterprise-class products from client-class offerings with availability during 2016.

AMD is attractively delivering significant energy efficiency through advanced platform enablement that delivers power efficient and superior performance IP, industry-leading power management and significant power features that have allowed for 10 times energy efficiency expansion from 2008 till 2014 and this growth approach is projected to deliver 25 times extra energy efficiency from 2014 till 2020.

The year-over-year advancement to newer cores highlight superior growth strategy of AMD, focused on delivering sustainable long-term company growth through strategic technology investments and controlling the non-core capital expenditures.

Nantong Fujitsu Microelectronics Co., Ltd. (NFME) and AMD have recently signed $436 million of agreement to introduce a fresh joint venture for expanding the customer base of AMD while providing it with distinguished assembly, test, mark, and pack (ATMP) competencies to both a wide range of customers and AMD.

Conclusion

Overall, the investors are advised to “Hold” their position in Advanced Micro Devices, Inc. considering the company’s significant long-term growth prospects but, currently weaker financial position with notable total debt of $2.24 billion against smaller total cash position of $716.00 million only, restricting the company to continue with its daily operations profitably. The profit margin of -15.53% seems disappointing. The PEG ratio of 0.08 signifies weak company growth and comparable to the industry’s growth average of 0.91.
Published on Jun 13, 2016
By Subhen Mittra

Copyrighted 2016. Content published with author's permission.

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