AMD on the Motley Fool
Brian Nichols (Advanced Micro Devices): Last Tuesday Bank of America Merrill Lynch held their annual Year Ahead Outlook conference and the message was clear for 2015: Look for where everyone is converged right now, and do the opposite. Candace Browning, head of BofA Merrill Lynch Global Research, added that technology, and specifically semiconductors are a good place to look for investments in 2015. If Bank of America is correct, then investors should be able to find good investments near 52-week lows. AMD is one of those investments.
AMD has had a bad year. The chipmaker's computing and graphics sales, used primarily in PCs, saw a 16% year-over-year decline in sales during its last quarter. Coupled with guidance for a 13% quarter-over-quarter decline in sales during the fourth quarter has led to a near 40% stock loss in the last three months. Further, AMD has announced job cuts to 7% of its workforce and has announced the resignation of its CEO. Yet in spite of all this bad news, gaming console sales have seen a recent surge in demand, which could be good for AMD given the fact that it receives an estimated $100 for every PlayStation 4 and Xbox One console sold -- AMD's chips are used in both consoles.
Given AMD's recent stock losses, combined with the 70% stock losses it has lost over the last five years, the stock might very well have bad news in its PC-related business priced accordingly. One positive about the job cuts is that AMD will be leaner, saving an estimated $85 million in operating expenses. Also, perhaps it's good that AMD will be under new leadership, as the stock has suffered mightily under CEO Rory Read.
All things considered, there's no doubt that AMD has had a bad year, and that's why shares trade at 52-week lows. However, with new leadership, lower operating costs, stable gaming console sales, and a renewed focus on growing its market share in servers, the stock might just have a turnaround in 2015.
