Why Advanced Micro Devices, Inc. Shares Plummeted

Is AMD's drop meaningful? Or just another movement?

Jan 22, 2014 at 5:27PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) plunged 12% Wednesday, after the company turned in decent fourth-quarter results but offered disappointing forward guidance.

So what: Fourth-quarter 2013 sales rose 38% year over year to $1.59 billion, compared with analysts' estimates which called for sales of just $1.54 billion. Despite the revenue beat, however, AMD still only recorded inline adjusted net income of $45 million, or $0.06 per share. Gross margin also fell by one percentage point to 35% as AMD's low-margin console gaming business continued to forge ahead.

In addition, AMD stated that first-quarter 2014 revenue is expected to decrease 16%, plus or minus 3%, compared with an 11% fall forecast by analysts. Meanwhile, gross margin is expected to remain depressed at around 35%.

Now what: Shares of AMD don't look particularly compelling to me, trading at around 37 times next year's estimated sales -- and keep in mind those estimates are likely to fall once analysts have time to fully digest today's news.

However, I think investors would be wise to at least add AMD to their watchlists, considering it is faring significantly better than it was in the same year-ago quarter, when the company recorded a harrowing adjusted $102 million net loss. AMD still has plenty of work to do -- most notably in chipping away at its massive $2 billion long-term debt pile -- but could stand to reward patient long-term investors if it can continue marching toward sustained long-term profitability.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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