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2-Star Stocks Poised to Plunge: AMD?

Based on the aggregated intelligence of 130,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, embattled chip maker Advanced Micro Devices (NYSE: AMD  ) has received the distressing two-star ranking.

With that in mind, let's take a closer look at AMD's business and see what CAPS investors are saying about the stock right now.

AMD facts

Headquarters (founded)

Sunnyvale, California (1969)

Market Cap

$1.51 billion

Industry

Semiconductors

TTM Revenue

$5.81 billion

Management

CEO Derrick Meyer (since 2008)

CFO Robert Rivet (since 2000)

Return on Capital (average, last five years and TTM)

(1.6%) and (8.8%)

Competitors

Intel (Nasdaq: INTC  ) ,

NVIDIA (Nasdaq: NVDA  ) ,

Analog Devices (NYSE: ADI  )

CAPS members bearish on AMD also bearish on

Citigroup (NYSE: C  ) ,

General Motors (NYSE: GM  )

CAPS members bullish on AMD also bullish on

Apple (Nasdaq: AAPL  )

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 184 of the 639 All-Star members who have rated AMD -- or 29% -- believe the stock will underperform the S&P 500 going forward. Among the entire bear population are dexion10, who is ranked in the top 2% of our community, and TAG042404.

Five days ago, dexion10 summed up the growing concerns of our community: "too much debt for the equity to survive and too little sales volume for operating profits not to nose dive."

In a pitch from January, TAG042404 offers a semi-glimmer of hope, but sides with the bear camp, nonetheless:

AMD, good history of products, but in a global recession companies like AMD have a hard time getting the necessary traction. I am unsure how AMD still remains solvent with approximately 2 years of negative EPS. This could be a great speculative stock at the current prices, but could be a trap. I feel AMD will have a tough time in the short term market, but if they can provide a new product that truly challenges AMD CPUs recent performances, they have a chance.

What do you think about AMD, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 130,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. NVIDIA and Apple are Motley Fool Stock Advisor selections. Intel is a choice of Inside Value, and the Fool owns shares of it. The Fool's disclosure policy always gets a perfect score.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 17, 2009, at 11:28 AM, Melaschasm wrote:

    AMD generally has good technology, and they have made some improvements to the ATI division.

    However, they have not been the best marketing company around, with their biggest limitation being the ability to get their technology inside the computers of the major manufacturers.

    AMD has greatly benefited from the growth of home assembly desktop machines, but this market could be in danger of shrinking as more people shift to laptops (which usually are not assembled by the end consumer).

    I remain a fan of AMD's technology, but the next couple years have the potential to make or break the company. I consider AMD to be a high risk investment, with big potential rewards.

  • Report this Comment On March 17, 2009, at 11:49 AM, altizar wrote:

    AMD will stay in business, mainly because Intel can't really afford to let them go out of business.

  • Report this Comment On March 17, 2009, at 11:50 AM, RedScourge wrote:

    Whoever wrote this drivel is an idiot.

    Where were you 6 months ago when this was accurate, and there wasn't a bevy of information on their plans to turn around the business, and when they hadn't already begun to execute this plan? Where were you when they announced plans to spin of their fabs, valued at at least $6 billion into a new joint venture between them and rich Middle Eastern investors? Where were you when they decided to issue 10% more shares in order to get more money to help their bottom line? Where were you when they sold some of their non-profitable business units off to the likes of Broadcom?

    Way to predict AMD share prices falling after their share prices have hit their LOWEST LEVELS SINCE 1970, based on the advice of 29% of the "All Stars", while neglecting the other 71% of them who say the opposite. I'm an "All Star" and I've only ever invested in two stocks in my life, I started playing this game like 4 months ago, and I've made maybe 50 picks in that whole time, which any idiot could do. I don't have any special stock powers, and I don't even pay attention to the scoring method in this "game", yet I've gotten to the top 10% effortlessly. That should tell you how much the whole 29% of your "All Stars" know about the market.

    You know nothing about the company, and if you haven't been following it for the past 6 months like I have, then you have absolutely no idea what the hell you're talking about. I don't think I'm an authority on them, but you won't see me "preducting" their demise based on throwing darts at a dart board like you have, because thats just stupid.

  • Report this Comment On March 20, 2009, at 2:47 PM, markfenix wrote:

    I'm growing highly suspicious of the "end of the world" stories for AMD specifically as the product offering itself is highly viable and new developments are in the forefront. Hey Pacampara, AMD is in a restructuring mode and while it's obvious chip-makers including Intel are struggling it's becoming more evident that they're in it to win it. If anything, I think the stock shows significant promise in the sense that theses guys are now turning more attention to the business server market while still showcasing initiatives to further develop their line and product ingenuity. Is the stock a grand slam, no, no stock is but if you plan on investing I think they're ability to adapt in a bear market has added to my own confidence.

    With respects to their spin-off Foundry Company it really got Intel running worried bent out of shape didn't it? Why else would Intel cry foul when clearly their claims are panic induced as Intel has convinced regulators that they're clearly trying to control the markets hoping to further increase their monopoly.

    Are the numbers worrisome - yes, but with the sale of their graphics and hand-held divisions the management is clearly poised to succeed by simple Business 101. Once the Intel's patent claim if proven to be a farce I wouldn't be surprised for one of two things to happen - 1. The announcement of a major partnership/ potential merger of a large software developer or 2. Pull a rabbit out of the RedHat (RHT) playbook and purchase it's own shares for the possibility of a merger or breakthrough product announcement.

    Hey fools, if I was a betting man I'd go all-in with AMD based on what they've done this year.

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