Advanced Micro Devices (AMD) | Suffering from the Bitcoin Haircut?

Advanced Micro Devices (AMD) | Suffering from the Bitcoin Haircut?

November 26, 2018 0 By JD

Once the closing bell rings out and the ticker tapes are swept up, fundamental analysis by the Monday morning quarterbacks commences.  Analysis such as; which company’s stock price set a new high, which stock saw the greatest trading volume, and which stock price fell the farthest, are all dissected.

There are a couple analyses I like to keep a close eye on at the end of every week, to see if further investigation is necessary to warrant the purchase of a stock position.  Most notably; which company in the S&P finished the week trading closest to its 52 week low, and which was trading farthest from its 52 week low.

Phillips 66 vs. Advanced Micro Devices

The S&P company trading closest to its 52 week low this week was Phillips 66, which set a new 52 week low on 11/23/18.   Conversely, Advanced Micro Devices (AMD) took the prize for being the company trading the farthest from its 52 week low at 53.35%, with Advance Auto Parts, Inc. coming in a close second, at 49.89%.

On 9/27/18

AMD hit a high of 32.63, then almost immediately began its 43.30% decline to where it is today.  This could be a “baby out with the bath water” situation since the market as a whole has been trending downward, or perhaps it’s something more sinister directly related to the semiconductor industry.  Seems like there are a lot of people considered  ‘in the know’ thinking the Semiconductor Industry may continue meeting headwinds in the months ahead.

Morningstar has AMD as “Overvalued”, with a fair value price of $11 per share, or about the price of  Double Whopper Value Meal.  Hard to believe you could get an artery clogging boyga, for the same price of a share of this publicly traded company who’s been around for nearly 50 years.  Where’s the justice?

Whats perpetrating Advanced Micro Devices downward trend?

It’s not as if the stock isn’t performing well, it is.  It’s just that the general consensus seems to think its in for a momentum change.   Like I said, Morningstar has it as ‘Overvalued’ with a very high uncertainty.   Dividend.com gives it a DARS score of .8 out of 5, E-Gads!  The Street gives it a C.  Personally, I was happy to get my hands on any C in school, but the equity market, well they’re not quite as impressed.  Investorwand.com predicts their 12 month target price to be $21.50, which is actually a 9.86% increase from Fridays closing price.

Slowing Demand?

2017 saw a fury of growth for the Semiconductor Sector, and optimism has likely spilled over into 2018, but that was then, this is now.  Texas Instruments see slowing demand, chip costs are on the rise.  Because of these and other factors, the sector may adapt a complete makeover, with its focus becoming; cloud based computing, security, and Artificial Intelligence.

Not having all their eggs in one basket

KPMG’s, Lincoln Clark reveals they did a survey of many companies in the Semiconducter Sector and a good portion of the respondents say that “diversifying into new business areas” is their top strategic priority. 

How is Bitcoin and AMD Related?

One word, Mining!  For those who don’t know, cryptocurrency mining is the process of using computer hardware, particularly with super fast graphics cards, to verify transactions on a blockchain.  The reward for this verification is cryptocurrency, or “coins”.  In late 2017 and early 2018, the value of cryptocurrencies such as Bitcoin and Ethereum, jumped up hundreds of a percent.

The belief that cryptocurrencies would become an acceptable means of worldwide commerce, seemed to be gaining traction.  That was January, this is November.  Now, 11 months after the record setting Bitcoin and Ethereum prices, these coins have taken a nasty plunge, and theoretically, so has the demand for the verification of transactions.  AMD is one of the leaders in the manufacturing of these graphics cards that miners use.  With the price of these coins having taken such a drastic fall from grace, so too has the desire for mining equipment.  Perhaps this is why as Lincoln Clarks survey finds, “diversifying into new business areas” should be a top priority for the AMD’s of the world.

Slick Photo compliments of:

Andre Francois