Big Upside for AMD Stock?
Advanced Micro Devices, Inc. (NASDAQ:AMD) has a strategy to beat Intel Corporation (NASDAQ:INTC) in the battle for virtual reality (VR) supremacy. AMD stock has already reacted favorably to the new strategy. In fact, AMD stock could benefit like never before from the company’s products, which will pose a major challenge for close competitors like Intel.
Such is the bullish buzz that Canaccord Genuity Group Inc., quite active in technology stock analysis, upgraded AMD stock from a mere “Hold” to a bullish “Buy.” The analysts gave it a $6.00 target, about 25% higher than its previous $4.42 close. On Thursday, AMD stock closed at $4.75. The fact that AMD stock had a consensus analyst price target of $3.68 gives an indication of the favor the company enjoys now. Canaccord sees AMD as the kind of second source that customers of graphics and microprocessors want as an alternative to Intel and others. (Source: “Advanced Micro: Polaris, Zen Impress, Says Canaccord, Buy the Turnaround,” Barron’s, June 16, 2016.)
There’s no doubt that AMD’s product strategy is a gift to consumers who want all the possibilities that virtual reality offers without the exorbitant costs usually associated with it. Those who wanted to compromise on costs, until now, could only look to the “GTX 970” by NVIDIA Corporation.
Now, the GTX 970 costs close to $400.00. AMD’s alternative offers faster performance but at a much lower price. In fact, it should also be certified for both “Oculus Rift” and the HTC “Vive.” In short, AMD’s “RX 480” is likely to be a truly amazing product.
AMD stock spiked in 2000 and it rose more than $90.00, but then collapsed weeks later to hit $15.38 as the technology sector bubble was bursting. Apart from another buildup to $40.54 in February 2006, AMD stock has generally traded in a band between $1.50 and $8.90. The RX 480 has given AMD stock its first realistic shot at moving above $10.00 in years. The analysts have clearly taken notice and AMD stock will get more attention.
Apart from its new products and foray into VR, AMD boasts no fewer than 10,000 patents. At any moment, especially if the sales of the new VR processor match analysts’ expectations, the company could decide to develop any one of those patents. (Source: “Surprise in Store: AMD’s Fiscal 4Q15 Earnings,” Market Realist, January 18, 2015). Indeed, patents can help AMD fund research and development, leading to a new phase of growth. AMD’s CEO Lisa Su believes AMD’s intellectual property is its best resource. (Source: “AMD Surging: Advantage in ‘HBM,’ Says FBR; Monetizing IP,” Barron’s, June 17, 2015.)
One of the main results of this intellectual capital is AMD’s “Zen” architecture. AMD confirmed at the end of last May that its forthcoming “x86” Zen architecture will propel the company back to the forefront of the desktop segment, which is now dominated by Intel. (Source: “AMD CEO Lisa Su Interview: Confident In Next Graphics Launch, Zen’s Success Is Key,” Tom’s Hardware, June 9, 2015.)
Jack Kerouac and the Beat Generation, who introduced the concept of Zen, had no idea how far that idea, originating in Mahayana Buddhism, could go. It is not an aesthetic or a style of decorating your house. It does, however, promote enlightenment and reflection. We shall spare you the technical details of why Zen applies to AMD’s new micro-architecture. Suffice it to note that you may achieve a state closer to Zen if you own a holding like AMD stock these days. Indeed, analysts have expressed optimistic scenarios for AMD stock because of the potential of its Zen architecture.
AMD should gain the No. 2 chip supplier spot for the PC and notebook markets as well as the server market. As virtual reality grows in demand, AMD will have the right suite of products to address this potentially huge market.