AMD Turns a Corner -- Cautiously

You want answers?
I think I'm entitled to them.
You want answers?
I want the truth.
You can't handle the truth!
-- Versified from A Few Good Men, script by Aaron Sorkin

If you have some cash to invest today, Mr. Market is doing you a solid favor. Shares of Advanced Micro Devices (NYSE: AMD  ) fell after a surprisingly strong earnings report, and I think it's all a big misunderstanding. In other words, this would be a great time to load up on discounted AMD shares.

Nobody seems to care about the flipside of the coin. The $0.66 GAAP loss per share was indeed wider than the year-ago quarter's $0.60 loss per share -- but much better than last quarter's massive $2.37 loss per share. Despite strong product launches from rival Intel (Nasdaq: INTC  ) and a continued weak economy, AMD has clearly turned a corner through cost savings and restructuring.

In terms of sales, the story turns outright positive. Net revenue was down 21% year-over-year to $1.18 billion -- but that's actually 1.3% net sales growth from last quarter. Last year, the first quarter saw 22% lower sales than the previous period. The year before that, it was a 36% seasonal sales swoon. In 2006, it was a 28% drop. AMD is producing stellar sales while swimming against seasonal currents.

As for CEO Dirk Meyer's presumed doubts about the PC market's bottom, here's what he had to say about that: "You know, I've heard some say that we've hit bottom. I don't know how anybody could say that we've hit bottom given the continued uncertainty that we have in the macroeconomic climate. And as a result of that I would say we're simply being cautious in our outlook." He's hardly crucifying Dell (Nasdaq: DELL  ) , Hewlett-Packard (NYSE: HPQ  ) , or server partner Sun Microsystems (Nasdaq: JAVA  ) here -- it's just conservative estimates for the murky waters ahead.

Historically, the second quarter has been a challenging quarter for AMD. "You put all that together and the outlook is murky at best, and that results in our forecast," Meyer said. And I think a few news outlets missed these ameliorating facts.

So AMD is going, going, gone at slightly lower prices today than yesterday, despite a generally up market. And I don't see any good reason for that price drop. Feel free to take advantage of the mispricing, while it lasts.

Further Foolishness:

Dell and Intel are Motley Fool Inside Value picks. The Fool owns shares and covered calls of Intel. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (6) | Recommend This Article (16)

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 April 22, 2009, at 10:42 PM, goldbob wrote:

    Buy AMD stock is a win-win situation.

    As far as I know, AMD cpu technology are ramping up and will pass Intel cpu performance soon. If this is true, you can earn more than 10 times of your investment on AMD stock. If it is not true, AMD is turning at the conner,

    you still can earn up mutiple times of your investment on the stock. Also, mostly likely some big companies will buy AMD at a very good price if AMD could not change it's situation.

  • Report this Comment On April 23, 2009, at 10:26 AM, SnarfJabroni wrote:

    The author writes:

    Shares of Advanced Micro Devices (NYSE: AMD) fell after a surprisingly strong earnings report, and I think it's all a big misunderstanding. In other words, this would be a great time to load up on discounted AMD shares.

    Nobody seems to care about the flipside of the coin. The $0.66 GAAP loss per share was indeed wider than the year-ago quarter's $0.60 loss per share -- but much better than last quarter's massive $2.37 loss per share.

    LOL...when I saw the headline on the AMD news stock ticker "AMD Turns a Corner"..I simply KNEW the author was Anders Bylund, without even checking.

    Utter fandom, from someone who owns AMD shares. Comparing their Q1 loss to their Q4 loss is useless, as the past three years, AMD has used Q4 to write down massive amounts of goodwill related at ATI.

    Also, surprising that you tell people to load up at $3 and change, when you told them last year that you couldn't see AMD going ANY LOWER than $6/share. http://www.fool.com/investing/value/2008/04/08/one-more-weak...

    Why would ANYONE listen to this cat regarding AMD, considering his clouded judgment, fandom and poor track record?

    And oh yeah, this shameless author deletes every one of my posts when I expose his AMD fandom, so I fully expect the same this time as well.

  • Report this Comment On April 23, 2009, at 11:05 AM, jpanspac wrote:

    Goldbob,

    Sorry to burst your bubble, but AMD is not going to surpass Intel in performance anytime soon. Their cupboard is bare.

    SnarfJabroni,

    I agree with you. Anders is a shameless AMD fanboy.

  • Report this Comment On April 23, 2009, at 2:56 PM, TMFZahrim wrote:

    I happen to believe in AMD for the long haul. Sorry if that makes me a fanboy, but I also recommend Intel if you're keeping score at home. And I don't have the power to delete forum posts or article commentaries, even if I wanted to. Just FYI.

    Shameless Anders

  • Report this Comment On April 23, 2009, at 5:01 PM, SnarfJabroni wrote:

    Good for you Anders, I appreciate the reply. I can tell you for CERTAIN I have had my posts deleted, that included no inflammatory or inappropriate comments...unless you count "fanboi" among them.

    At any rate...you have believed in AMD for the "long haul", for MANY years now, and in fact if we are to believe your bio and that written by your co-worker, it was your very first purchase as a young man.

    "Anders decided to set aside $1,000 to open a brokerage account. He earmarked half of that sum to buy shares in AMD (NYSE: AMD). He didn't commit a whole lot of research to the decision; he simply chose the chip maker because he was passionate about the company's products."

    http://www.fool.com/investing/high-growth/2006/03/15/one-swe...

    Yet now, you somehow think the company is "bulletproof"?

    http://www.fool.com/investing/high-growth/2009/03/17/how-rea...

    So the question - just how LONG is your "long run", and why do you keep trying to suck others into your pain?

  • Report this Comment On April 24, 2009, at 6:24 AM, TMFZahrim wrote:

    Put it this way -- the markets, including our anti-trust agencies, wouldn't stand for a total INTC monopoly. AMD is its only competition. The worst outcome I can see for AMD would be a buyout by IBM or TXN or heck, maybe even CSCO the way that company has been acting lately. But even that seems unlikely.

    Dirk Meyer should've gone CEO years ago. He's performing in ways Dr. Ruiz never could, and it's kinda like haviing the ghost of Jerry Sanders back at the helm. AMD won't ever kill Intel, of course, but is good enough to provide serious competition -- and make money doing it.

    So yeah, my "long run" ain't one year or three -- I'm planning to do a Buffett here and never sell. And sure, it's painful now if you (like me) got in at double-digit prices. But look at a long-term chart. AMD has a history of sharp falls and then strong recoveries. And hey, if you bought when the Foundry spin-out was approved three months ago, it's a 70% gain today.

    Love this stock in the $3s and $6es -- still like it at $15. Above that, not as clear-cut.

    /rant

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