The past few years have witnessed an unfortunate performance from AMD. The second quarter release recorded a year-on-year revenue fall of 18% and 63% fall in the operating income of the company. Similarly, the computing solution segment experienced a fall of 20% on a year-on-year basis.
In the midst of these lowly performances, the computing segment of the company recorded a sequentially improving revenue because of an increase in the desktop unit and notebook server sale. The segment experienced an operating loss of $39 million with an operating income of $2 million. AMD has a gross margin of 40% against the figure of 22% for the previous year.
Slow PC Market: How AMD is making an exception?
There is no doubt about the slow PC market and there are chances that AMD might suffer a similar fate as that of other PC companies. However, the company is ready to enter the semi-custom chip market with some innovative products. In addition to this new strategy, leading companies such as Sony and Nintendo have agreed to use these chips in their upcoming products. The implementation of latest semi-conductor chips will boost the demand of GPU’s and CPU’s offered by the company.
The individual investors might be uncertain about the success of this new development, but the hedge fund managers are optimistic about this approach of the tech giant. Some of the major hedge fund managers for the company include Brian Taylor, Andrew Sandler, Steven Cohen, and Howard Marks.
Why invest in AMD?
According to the fundamental values (price-to-sale ration), it is certain that the company is undervalued as compared to its major competitors. AMD has a price-to-sale ratio of 0.55 against 2.12 of Intel, 1.97 of IBM, and 2.06 of Nvidia. A similar trend can be experienced in the beta value of the company where it has a rating of 2.55 against 0.93 of Intel, 0.73 of IBM, and 1.64 of Nvidia.
According to the future predictions for the company, AMD is valued higher because of an estimated EPS growth of 11.50 percent in the next 5 years. The EPS growth for Intel and IBM is expected to be 11.00 percent and 9.96 percent respectively. The share price growth of 70% in the last 3 months for AMD makes it better than most of its competitors.
According to the research “Global Semiconductor Market Outlook to 2017”, the semiconductor industry has a bright future and it is expected to grow at a CAGR of 7.6 percent until 2017. This growth will be powered by the increasing demand of tablets and Smartphone in the market. The slight improvements made by the company has upgraded its status to outperform, as per the ratings of FBR Capital and Wells Fargo. The fundamental analysis is promising a bright future for AMD. It is up to the choice of the investors to invest in the company and gain hefty returns in future.