The shares of this semiconductor stock were just initiated at Wedbush with an ‘Outperform’ rating.
Advanced Micro Devices, Inc. (AMD)
From The Inger Letter
My update for ‘Pick of the Year’ selection of Advanced Micro Devices (AMD) from the 16-17 Buy-Zone. It’s now doubled, and is back to resistance around last year’s high.
Our ‘buy-zone’ of 16-17 was first estimated back in Berlin at IFA nearly a year ago. My view at the ‘world’s largest consumer technology show’ (larger and months earlier than Vegas CES), as I met with the Product Developer, was that I loved the company’s new graphics processor and potential; but not at the then-32 Dollar price for the shares.
My reasoning included belief a prior run-up was partially based on fanatic purchase of computers to ‘mine’ Bitcoin and Cryptocurrency. And that such mining ‘sales’ (of processors) would collapse based on my forecast since 20,000 early that year of the breakdown, and eventual impact to AMD shares; ideally cutting it in half; by yearend ’18.
It did, and believing (even Bitcoin was basing and would rebound; but not for that reason), I made Advanced Micro Devices (AMD) my ‘2019 Pick of the Year’. Now the shares are back-up to the same price level; and some investors are either questioning its sustainability, or even chasing it on the upside now. Both are not appropriate strategies.
First of all; the processor dependency is less-dependent upon cryptocurrency mining; as we get more into advanced AI (Augmented Intelligence) and AR (Artificial Reality) as well as even autonomous driving systems (that also can be processor/algorithm intensive). Additionally, with the ‘truce’ concluded with China on the ‘trade front’ for now; and the ability of AMD and others to sell into the Chinese market; the continuity of business in general persists. Ultimately, we will anticipate a favorable conclusion to the ‘trade negotiations’, although as I’ve written regularly, a trend towards outsourcing and supply-chain diversification is already enshrined into business plans. That is not a negative for AMD and may benefit them in ways I shared with subscribers.
So, while we do believe an investor could have taken a little off-the table as it doubled to 32 from our 16-17 buy-zone (yes, a 100% gain in 6 months), we believe after consolidation, higher prices will be seen in 2020. After all, I have an old saying about what to do when a stock has doubled from initial purchase: “sell half and hope you’re wrong”.
In this case, I am comfortable retaining an entire AMD position (eventually believing it is well positioned versus too-pricey NVIDIA or lackluster Intel); but will evaluate this as it evolves. Semiconductors and others involved in China should get some reprieve, so that includes our years-ago pick of Micron (MU) at 5 (with a partial sell target of 30 at the time); and even struggling LightPath (LPTH) (a double briefly from 2 to 4; but then cratered to sub-1); which is now struggling but ideally emerging from relocation of its New York facilities to Orlando, and a pattern that suggests a return to profitability within less than a year.
Finally, yours truly will again attend IFA in Berlin in September, and plans to meet with AMD’s staff again and update their fundamental product prospects as we move into 2020.
Gene Inger, The Inger Letter, www.ingerletter.com, June 30, 2019