Delving into the fundamentals, AMD's price to sales ratio shows that the company is severely undervalued in comparison to its rivals in the semiconductor industry. AMD's price to sales ratio is 0.50. But investors are valuing the price to sales ratio of Intel (INTC) higher at 2.08. And the same can be said at 1.95 for IBM (IBM) and 2.01 for Nvidia (NVDA).
Not surprisingly, investors grossly undervalue the company's forward P/E of 23.81. It is considered more expensive going forward when looking at Nvidia (18.69), Intel (11.19) and IBM (10.01). AMD at a beta of 2.45 is considered more risky than Intel (0.84), Nvidia (1.69) and IBM (0.76).
In the long run, AMD's underestimation could be misleading. Its share price growth in the past three months has been about 36%, more favorable than 4.7% for Intel, - 2.17% for IBM and 17.6% for Nvidia. Additionally, its EPS growth in the next five years is estimated at 11.50%, higher than 11.00% for Intel and 9.96% for IBM. Nvidia, however, is higher than AMD at 12.00%.Analysts
AMD has been diversifying its business outside the slowing PC market. Its chips will be utilized in Microsoft's XBox One and Sony's Play Station 4 gaming consoles. Hedge fund traders and analysts are excited by this. Canaccord Genuity upgraded the stock from hold to buy with a price target of $85 a share. FBR Capital upgraded the stock from market perform to outperform, saying AMD may have a larger revenue opportunity by selling full microserver systems
UPDATE: Canaccord Genuity Upgrades AMD (AMD) to Buy
Updated - July 11, 2013 8:51 AM EDT)
Canaccord Genuity upgraded AMD (NYSE: AMD) from Hold to Buy with a price target of $5.00 (from $3.00). Analyst Bobby Burleson thinks AMD's embedded business ramp will accelerate.
"We are upgrading shares of AMD to BUY from Hold ahead of what we expect to be strong performance versus PC-centric names as the company ramps its embedded business and begins to transition away from a near-exclusive reliance on PC demand. Specifically, we believe the embedded opportunity could drive momentum in Q3 as game consoles where AMD supplies custom silicon begin their production
ramp ahead of the holiday shopping season," said Burleson.