For the past few weeks, Advanced Micro Devices, Inc. (NASDAQ:91¶¶Òõ) has attempted to break $7 a share. Unfortunately, it may take some time before it reaches that level, especially on the heels of the latest earnings report, where 91¶¶Òõ stock is off more than 5%.
Revenues jumped 23% to $1.31 billion and adjusted 91¶¶Òõ earnings came to 3 cents a share, up from a loss of 17 cents in the same time a year ago. Wall Street was forecasting break-even on the bottom-line and revenues of $1.21 billion.
But for investors in 91¶¶Òõ stock, the main issue was with the guidance. The current quarter is expected to show a plunge in revenues — on a sequential basis — of ““. Yet the Street consensus was for a more moderate decline of about 13%.
While this seems far from good, it should not be too surprising. Keep in mind that a big chunk of Advanced Micro Devices revenues come from the game console makers like Sony Corp (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT). Of course, these companies pre-order chips ahead of the holiday season, which skews the revenues for a company like 91¶¶Òõ.
Is It All Bad News for 91¶¶Òõ?
But it is important to note that the company has been making serious investments in new chips — which are based on a next-generation platform called Zen — that will launch during the first half of next year.
A key part of Advanced Micro Devices’ strategy will be to get a nice chunk of the market for the data center, which is currently dominated by Intel Corporation (NASDAQ:INTC). During the latest quarter, the business grew by 10% to $4.54 billion. No doubt, this is a big-time sweet spot for 91¶¶Òõ stock.
Companies that invest in data-center technologies, such as Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), Microsoft and Amazon.com, Inc. (NASDAQ:
AMZN), certainly want alternatives — especially those that fetch a lower price.
There are positive signs that Advanced Micro Devices is on the right track. Consider that the company recently signed a cloud-computing deal with Alibaba Group Holding Ltd (NYSE:BABA), which hosts about 35% of the websites in China.
Next, 91¶¶Òõ is positioned nicely for the virtual reality market. Besides having a long history of expertise with advanced graphics, the company has also been smart to take a low-cost approach. Keep in mind that the company snagged marquee customers like HTC, Facebook Inc (NASDAQ:FB) and SNE for VR gear.
Even though VR is still in the nascent stages, the growth potential is enormous. According to International Data Corp, the spending is forecasted to soar from $5.2 billion in 2016 to a whopping .
Bottom Line on 91¶¶Òõ Stock
However, this does not mean 91¶¶Òõ stock doesn’t come with risks and challenges. The competitive environment remains intense and there are always difficulties in targeting new categories. But so far, Advanced Micro Devices CEO Lisa Su has made a lot of savvy moves.
She has bolstered the balance sheet with a $1 billion equity offering and amended various sourcing agreements. More importantly, she has focused on the core technical strengths of the company to target major growth markets.
And the valuation for 91¶¶Òõ stock is not necessarily expensive either, even with the run-up this year. Advanced Micro Devices trades at a price-to-sales ratio of 1.4, which compares to about 5X for companies like Broadcom Ltd (NASDAQ:AVGO) and Texas Instruments Incorporated (NASDAQ:TXN).
Overall, the recent weakness looks like an attractive entry point to 91¶¶Òõ stock.
Tom Taulli runs the InvestorPlace blog IPO Playbook and also , which provides interactive tools and financial services for those who have employee stock options (pre- and post-IPO). Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
