I can't be the only investor out there who's noticed this little quirk of fate with his stocks. It seems like whenever one of my companies has good news (like better-than-expected earnings), the news comes on a bad day for the market and I don't see the juice in the stock price. Likewise, whenever bad news comes, it's not so conveniently overlooked.
Investors in Advanced Micro Devices
In the third quarter, sales rose 23%, gross margins expanded a bit, operating income grew about 15%, and reported net income rose 73% over last year. On a per-share basis, earnings came in 50% higher than in the year-ago quarter. Relative to the mean, AMD outperformed expectations by about 10% on the top line and more than 100% on the bottom line.
While the soon-to-be-spun-off Spansion memory business saw revenue fall 4% and produced an operating loss, business in the CPG group (which makes chips for servers, desktops, and laptops) was much better. Sales here were up 44%, and operating income more than doubled as the company generated about 14% of its revenue from its new dual-core technology.
Not that much of any of this is helping the stock today. Analysts are apparently worried about valuation, since the stock has appreciated about 75% over the past year. The funny thing about valuation is that it matters only when you want it to matter. In any case, I can't and won't argue that AMD is cheap. But I'm not sure that regular valuation metrics would have pegged it as cheap when it was still trading in the mid-teens.
To me, the bigger issue is simply the fact that AMD has never been able to emerge from the considerable shadow of Intel
In such a well-established market, I can't see any pressing reason to buy shares of the runner-up. Sure, AMD has won a few battles with Intel in the past, and maybe customers such as Hewlett-Packard
More chips? Bet you can't read just one:
- AMD Processes Earnings
- Intel's Optical Breakthrough
- Semiconductors' View Semisweet
- Dreadful Stocks to Avoid
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).