AMD and their quiet comeback, you can’t dismiss them yet

Advanced Micro Devices, Inc. (AMD) shares have moved up 11% since May 9th including the 5% fall since Wednesday (5/23).

So what’s all the fuss about? Do you care? Should you care?

Jon Ogg was trying to figure out last month: Can Applied Materials & AMD Rumors Hold Any Truth? Doug McIntyre pointed out on May 15th that ThinkEquity raised AMD shares to a "buy" because the research firm believes that orders from Dell (DELL) are strong, and now that Dell is selling PC’s at Wal-Mart (WMT) – maybe it will come true. American Technology Research raised its rating on AMD and they believe the company will sell some of its operations and pay down part of its very large debt load. But again, these analysts’ moves are all based on speculation.

Speculation can be a dangerous word and it also is a motive for why many of us buy and sell stocks on a daily basis. We are all searching for that perfect stock, we want that 400% return, let’s be honest – who doesn’t. It’s part of the reason you are reading this article right now, "does this dude think AMD is a buy, get to the point, come on! Some where in the world while you read this article, a tree is falling in the forest, so does it make a sound? Come on my fellow readers, I’m just having some fun here, so back to AMD.

All of us here at 24/7 Wall St. have a different opinion on AMD, so let’s look at the facts.

AMD is trading $2 above its 52-week low, the range of AMD shares has been $12.60 to $31.95 for the past year. Intel has been beating them on almost every initiative lately, but let’s not forget little ol’ AMD brought in $5.6 billion in revenue last year. AMD is burning cash and their $611 million loss in the first quarter isn’t reassuring for investors. The majority of Wall Street hates AMD, doesn’t think its worth buying, and their conclusions are justified by the current share price. So enter speculation, the Wal-Mart deal, the One Laptop Per Child project (if you don’t know about this, read this and also read the 60 minutes story – Nicholas Negroponte is a modern day Saint) and the shares are trading at only $14 and change. The fundamental analysis of AMD paints the picture that you should stay away, but all it takes is some good press, a solid quarter, and it’s off to the races. Now that AMD has issued subpoenas to Intel’s lawyers for allegedly coercing computer makers, retailers and distributors to buy its chips instead of AMD’s, it’s an all out war. Just think, if AMD wins or if a few things start to go AMD’s way, what do you think the share price will do?

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.