Is AMD a Buy This Time?

About four months ago, I shocked many of my regular patrons when I said that Advanced Micro Devices (NYSE: AMD  ) wasn't a screaming buy at that moment in time. The company had plenty of things going for it, but the stock looked fairly valued just short of $10 a stub. "Would I buy AMD again today?" I asked. "I'm not backing up the truck to buy more unless AMD takes another nosedive for no reason first."

Well, that day has come. AMD now trades about 20% below where it was on that fateful day in March, and now presents a comfy value cushion. Buy today and sell at $10 a share, and you'll have a very nice 35% return on your hands. That sounds eminently doable and very much worth the effort.

Meanwhile, not much has changed about the business:

• The long-term promise of AMD's Fusion strategy draws closer to fruition, day by day.
• The company is still taking market share from Intel (Nasdaq: INTC  ) in multiple sectors.
• CEO Dirk Meyer still hasn't disappointed in any serious way since taking the reins. That's in stark contrast to his predecessor, Hector Ruiz, who tended to overpromise and underdeliver.
• The balance sheet looks stronger and stronger thanks to debt refinancing moves, a leaner capital structure, and a near-breakeven bottom line. AMD has crept up into a nearly respectable Altman Z score of 1.17, up from as low as -1.32 in the fourth quarter of 2008.
• In the graphics chip market, AMD holds main rival NVIDIA (Nasdaq: NVDA  ) in a mortal headlock and shows no signs of letting go. Apple (Nasdaq: AAPL  ) still won't use AMD processors to power its Macintosh systems -- but they do come with AMD's ATI graphics exclusively nowadays.

The market moves in mysterious ways, to paraphrase Bono, and there's no real reason why AMD's stock should be priced so much lower today than where it sat in late March. Still, there it is -- a value play ripe for the picking. Just remember that you're buying a volatile stock (beta: 2.14) that doesn't pay a dividend and operates in a truly cutthroat market. Buckle up for a bumpy ride, but one with more ups than downs in the coming year or two.

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