Semiconductor firm Advanced Micro Devices, Inc. (NASDAQ:AMD) has received a lot of positive press over the past month which has caused AMD stock to rise 8% in just 30 days. The optimism regarding AMD hasn’t been unfounded though- the firm actually does have a lot going for itself that makes it a worthwhile long-term play. While it might seem prudent to wait until a pullback to add AMD to your portfolio, investors may want to consider buying AMD now before the stock pops at the end of the month.
Source: Matthew Rutledge via Flickr
Advanced Micro Devices is due to report its third quarter results on October 24, and I believe those figures will help propel the stock markedly higher. AMD has been able to significantly lower its debt obligations over the past year and the firm is likely to continue doing so in the quarter to come. It was able to report positive operating income for the first time since 2014 and that trend is seen continuing in the upcoming results.
Not only that but AMD has been making big moves that are impressing both analysts and investors. The firm recently released a new low-power chip, as well as a high-end graphics processing unit (GPU). Both of the chips won’t have any financial impact in the near-term, but the October earnings call is sure to at least mention how the new products are performing and give investors an idea of how much of a bump they might offer in quarters to come.
Growing Outside the Box
The new chips are a big deal for AMD and their releases have been a big part of the reason AMD stock price is as high as it is right now. On one hand, the high-end Vega GPU is expected to help boost margins, something AMD has been struggling with over the past few years. On the other hand the low-power chips provide a powerful growth opportunity outside the PC space, and that’s a good thing because demand for PC’s over the next decade is uncertain at best.
AMD’s latest low-power chip, the Embedded Radeon E9170 Series GPU is purpose built for smaller systems like medical displays and retail signs. That should be comforting to investors because it gives the company a growth opportunity outside of the fickle PC market.
Grabbing Market Share
The other reason that this quarter’s earnings are likely to boost optimism around AMD stock is the fact that the firm is quickly gaining marketshare and putting up a reasonable fight against some of its larger competitors. Analysts see AMD growing its revenue by 18% this year thanks in large part to components that directly compete with counterparts NVIDIA Corporation (NASDAQ:NVDA) and Intel Corp. (NASDAQ:INTC).
AMD’s Vega GPUs I mentioned above are in direct competition to NVDA’s offerings. AMD also makes a CPU called Ryzen which is comparable to Intel’s high-end processors but retails for half the price.
The Next Big Thing
The other reason to be excited about AMD’s future is that the firm is working to create components that will power what is expected to be one of the largest technological shifts in society since the internet- driverless cars. There’s no doubt that autonomous driving with significantly change the way people travel, and tech companies would be negligent to ignore the huge growth opportunity that driverless cars will offer.
AMD recently partnered with Tesla Inc. (NASDAQ:TSLA) to develop an artificial intelligence chip that will help power self-driving cars. This is a big deal because not only does it give AMD a way into the driverless car revolution, but it aligns the firm with arguably one of the most innovative car companies in the world. Many people see Tesla as a leader when it comes to innovation in the automotive industry, so it makes for a valuable partner in developing driverless car technology. Not only that, but it gives a pretty powerful vote of confidence to AMD’s products.
The Bottom Line
AMD stock is certainly not cheap and it doesn’t come without some risk. At $13 per share, some are waiting for a pullback in order to buy. However, I see AMD’s third quarter earnings highlighting the firm’s forward momentum and sending the stock higher, making now a good time to buy in to benefit from the earnings pop. AMD has diversified its offerings in a way that provides several different growth opportunities making it a good bet in the tech space for long-term investors.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
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