AMD Stock Price Forecast: Why You Should Stay Long On Advanced Micro Devices

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Summary:

  • Advanced Micro Devices’ stock has risen to near the $13 price barrier. I am still reiterating my buy rating for AMD.
  • Several catalysts happened over the weeks since my previous buy recommendation for AMD last March.
  • First, Intel successfully killed Nvidia’s GeForce Partner Program. This will help AMD Radeon GPUs remain a viable alternative for successful PC gaming brands.
  • Second, Intel has postponed mass production of its 10-nanometer Cannon Lake processors to next year. It means the 12-nm produced 2nd-Gen Ryzen processors have a better chance to succeed.
  • Third, AMD’s datacenter effort might just get a serious boost from Qualcomm’s reported exit from server processors.

I am staying long on Advanced Micro Devices (AMD). This is in spite of the stock’s substantial gain from $9.55 last April 3 to $12.8 this week. I added more AMD when it traded below $10. This was days after I made by buy recommendation for the stock last March 29. That March article was to dispel the downgrade-to-sell assessment by Susquehanna analyst Christopher Rolland for AMD.

I am smarter than Rolland and have better understanding of AMD’s current and future business performance. Christopher Roland changed his sell rating to neutral for AMD just days ago. He finally realized that AMD’s tailwind from GPU-using Ethereum miners will remain strong in spite of the upcoming release of ASIC mining hardware from Bitmain.

My reiterated buy recommendation for AMD is again backed by this stock’s bullish algorithmic market trend forecasts from I Know First. You all should trust the stock-picking artificial intelligence algorithm of I Know First when it comes to AMD. I Know First has above .50 predictability scores on the 1-month, 3-months, and 1-year trend forecast for AMD’s stock. It means I Know First has an impeccable accuracy in predicting the short and long-term market movement of AMD.

The commitment of Ethereum and Monero blockchain developers to fork their cryptocurrency algorithm as an anti-ASIC move truly fortified the long case for AMD. Even JP Morgan is now recommending AMD as a buy. JP Morgan went bullish on AMD because of cryptocurrency. However, AMD’s performance this year has other catalysts besides cryptocurrency mining.

Intel Helped AMD By Killing Nvidia’s GeForce Partner Program

I explained at Seeking Alpha that Intel (INTC) was behind HP, Inc. (INC) and Dell’s rejection of Nvidia’s (NVDA) GeForce Partner Program or GPP. Without the support of these two top selling PC vendors, Nvidia had to kill GPP. The early death of GPP means top PC gaming brands like Alienware, Omen, Republic of Gamers can still use Radeon GPUs from AMD. GPP was Nvidia’s failed attempt to compel PC vendors and video card accelerator vendors to use only GeForce GPU products on their PC gaming brands.

The quick demise of Nvidia’s GeForce Partner Program will further improve AMD’s chances in increasing its market share in discrete video card sales. As Per Jon Peddie’s chart below, AMD ended Q4 2017 with 33.7% market share in discrete GPU sales. This was a notable increase from Q4 2016’s 29.5%.

(Source: Jon Peddie Research)

The more discrete video cards that AMD can sell, the better its top line and bottom line growth prospects.

No 10-nm Intel Processors This Year

Aside from expected stronger GPU sales, AMD is also expected to see a notable sales boost from its 12-nanometer made 2nd-generation Ryzen processors. This latest batch of Ryzen x86 processors is cheaper and faster. Intel, therefore, has no strong equalizer because its 8th-Generation processors for this year are still made using its 14++ nanometer manufacturing process.

Intel’s Client Computing Group will likely suffer from AMD’s more affordable pricing for 2nd-Gen Ryzen processors. Unless Intel matches the price tags below, its 8th Gen Coffee Lake processors will see weaker sales this year.

(Source: AnandTech/AMD)

The fact that 2nd Generation Ryzen processors are cheaper and faster than 8th-gen Coffee Lake will inspire top PC vendors to use them to improve their hardware margins. PC sales leaders Lenovo, Dell, and HP, Inc. already announced they are going to use Vega GPU-equipped Radeon Pro APUs for business computers.

I expect them to also use 2nd-gen 12-nanometer Ryzen processors for their desktop gaming and office computers. The new flagship consumer processors of AMD, the Ryzen 2700X and Ryzen 5 2600X are obviously top choices for gaming or multimedia editing.

(Source: AnandTech)

Expect More AMD EPYC Sales From Qualcomm Quitting Server Processors

The third tailwind for AMD is the reported retreat of Qualcomm from server processors. If Qualcomm really quits the datacenter processor business, AMD will likely sell more of its $1,999 EPYC server processors. The thing is Qualcomm has the budget to really market and support sales of its ARM-based 48-core Centriq server processors. Qualcomm could capture the small businesses market for server chips.

Fortunately for AMD, Qualcomm is probably realizing that there’s low margins on selling server processors to budget conscious small businesses. AMD doesn’t have that same problem. Investors and hedge fund managers will rally around AMD’s stock if the company can get 5% of the x86 server processor business. Right now Intel still owns about 98% of the x86 datacenter processor industry.

My view is that AMD will focus more on gaining market share in server processors. Operating margins is not the primary reason why AMD came up with its outstanding EPYC server processors. It only wants to gain back some of its lost market share in the datacenter.

Conclusion

I will only consider selling my AMD shares if the stock hits $15. I expect to do so before 2018 ends. AMD is very lucky this year. Certain positive events are helping it maximize the potential sales from its Ryzen processors and Vega GPUs products. Due to the death of GeForce Partner Program and Intel’s postponement of its 10-nm process to 2019, I expect AMD’s Computing and Graphics business segment to register $1.75 billion in Q2 2018.

Our buy recommendation for AMD is backed by the strong buy signals from analysis of this stock technical indicators and moving averages trends.

Past I Know First Success With AMD

On March 29,2018, I Know First published a premium article saying that it’s a sell time for AMD’s stock . I Know First has been bullish on AMD’s stock on 1, 3 months and 1 year time horizon. Over the those few months and the following year, AMD’s share price of some $10 at that time was predicted to rise. As seen with the relatively high predictability indicator of 0.59, the algorithmic forecast predicted a strong chance of the stock rising over these timeframes. From the below graph one can see that on 1 month horizon the I Know First algorithm successfully predicted the movement of the AMD stock price which is surge by 13.25%.

This bullish forecast for AMD was sent to I Know First subscribers on  March 29,2018.

To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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