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AMD: Profits will eliminate smoke – Advanced Micro Devices, Inc. (NASDAQ: AMD)



In recent months, AMD (AMD) introduced the Ryzen 3 mobile, the Raven Ridge architecture and the Ryzen second generation. Despite these discoveries, AMD again operates close to single digits.

Regarding the valuation, it is very similar to the one I presented in my previous article if not something better.

The future of AMD is not without risks, but its current price is excessively pessimistic. Fear is hiding the progress that AMD has made. Quarterly earnings will ease investor concerns and could be the catalyst for AMD to push the price higher.

Ryzen Rollouts

This month, AMD announced the launch of Ryzen 2. The price was cut substantially, and the performance is in line with expectations.

Game performance remains the Intel suit (INTC), and delivered an average of 8% more frames per second (FPS) than the AMD Ryzen in several games.



Source: Linus Tech Tips

The non-game related benchmarks show AMD's strengths. AMD delivered an average of 23% better results than Intel in 7 zip, Blender and Cinebench. The game is typically a single-thread workload, and fewer cores tend to work better, while more cores work better with several non-game tasks.



Source: Linus Tech Tips

These benchmarks are made by comparing Ryzen second generation with its Ryzen and Intel first generation equivalent with the closest performance. When we add price consideration to these benchmarks, AMD offers attractive proposals.



Source: AMD and Intel

The Benchmark compares the second generation Ryzen 5 2600X with its first generation counterpart, the Ryzen 5 1600X. Intel's counterpart, the I5-8600K is considerably more expensive than AMD and has a price closer to the Ryzen 7 1800 and 1700X, both higher CPUs.

The incredibly low prices of the first generation of Ryzen will remain until AMD is out of stock, and the rest of the second generation of Ryzen is launched. Meanwhile, Intel will suffer from the price gap. Even Ryzen second generation is substantially cheaper when you consider that AMD includes a spectral cooler with all second generation models.

If AMD performs a similar price reduction for the second generation of Ryzen 3, Intel will have difficulty retaining the CPU Market budget. Even if Intel has better performance in the games, budget players can sacrifice slightly higher FPS for a better price tag. The architecture of Raven Ridge could further increase this trend.

The architecture of Raven Ridge combines Vega and Ryzen. The two available models are AMD Ryzen 3 2200G and AMD Ryzen 5 2400G, priced at $ 94.99 and $ 159.99 respectively. In comparison, Intel's i3 prices range from $ 168 to $ 117. Unless Intel responds appropriately to AMD prices, AMD can earn a sizeable portion of the budget CPU market.

Risks

Three risks could harm AMD for the most part. Cyber ​​Security Flaws drops AMD sales, NVIDIA boosts exclusivity with suppliers and Bitmain ASIC for Ethereum (ETH-USD).

Security flaws: The CTS-Labs report on AMD security flaws could discourage sales. However, for faults to be exploitable, administrative access to the system is required.

"There is no immediate risk of exploiting these vulnerabilities for most users, even if all the details were published, the attackers would need to invest significant development efforts to build attack tools that use these vulnerabilities. This level of effort is beyond the reach of most attackers "

Source: Trail of bits report

Specter and fusion are much more serious threats, since the correction of defects impacts performance. These defects will affect Intel, which could be a beam of light for AMD (this video briefly explains Specter and Meltdown). While the CTS report is bad publicity, the increase in security awareness could end up benefiting AMD.

Nvidia's GeForce Partner Program (GPP): NVIDIA's exclusive program (NVDA) is full of uncertainties. Kumquat Research has a complete article that details the implications of the program. In summary, the program aims to increase the influence of Nvidia in the market, and AMD is in trouble. Nvidia started targeting OEMs, and it seems that they are also targeting resellers, as the tweet below shows.



Source: Scott Herkelman CVP @ GM AMD Radeon Gaming & # 39; s Twitter.

AMD is responding with a video called "Freedom of Choice." The video is well done and could put the community of players on your side. It will be interesting to see how AMD addresses this in the quarterly earnings call.

Ethereum Mining: Susquehanna downgraded to AMD in reports that Bitmain had developed an ASIC for the Ethereum extraction that would reduce the AMD sales by 20%. DigiTimes recently reported that:

Bitmain ASIC provider has postponed shipments of its Ethereum ASIC miner, the Antminer E3, from April to mid or late July due to the weaker-than-expected performance of the circuit, but the company is still Expected shipments to reach the original goal of 1.8-2 million units in 2018, according to industry sources.

Source: Digitimes

This puts AMD in a more comfortable position, and the target price of $ 7.50 probably off the table. While AMD's current sales of graphics cards could be very good for the Ethereum miners, the overall demand for graphics cards is still very high. The demand has increased due to the proliferation of cryptocurrency offers and the demand of the gaming market. Even if Bitmain offers the specifications of its ASIC, I doubt that AMD has problems selling its cards.

Conclusions.

AMD has several pending releases for this year, not to mention the possibility that EPYC brings a positive surprise. While stocks are not free of risk, there are many more reasons to be bullish than bearish. In just over a year, AMD achieved profitability, launched Ryzen, EPYC, Radeon Vega and the powerful Threatripper. The price is the same as in December 2016, and it is a much better company than it was back then.

As Warren Buffett said: "Be afraid when others are greedy and greedy only when others are afraid."

If there is anything in this article, you agree or disagree with, or would like me to expand even more; I sincerely appreciate you leaving a comment. I will approach it as soon as possible. I'm looking forward to AMD, so I'll continue writing about that. If you like this article, subscribe!

Disclosure: I am / we are AMD long.

I wrote this article myself, and expressed my own opinions. I am not receiving compensation for it (which is not from Seeking Alpha). I have no business relationship with any company whose actions are mentioned in this article.


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