Anyone invest in AMD yet?

BloodBath

I posted about buying AMD shares a while ago in the building and upgrading forum when prices were at $2.80. As of today the share price are up over 60% to 4.38.

I'm new to this and this is the first stock I have invested in but I knew a lot about the company and where they are going and managed to get on-board early.

However I still think there is good value here based on the company's history and their future. First quarter showed a net loss of $90 million. Q2 report is coming June 15th. This should be an improvement on the first Quarter. By Q3 they should be back in black and Q4 they should be posting good profits.

This is based mainly on the console deals which they have in the bag. They are producing the cpu and gpu for all 3 next gen consoles. AMD are in a unique place in the market as being the only chip developer who can provide good custom apus with strong graphics and processor performance. This is the reason they won these contracts.

It is unknown what their profit margins on these apus will be but current low end estimations would put them at increasing profits by $200-400 million per quarter. This would be 10 million units sold per quarter at $20-40 profit per unit. Their margins may well be higher. This would push them well back into the black.

Their pc processor market is being crushed by intel, although they still offer better budget options, the oems favor intel. Their pc graphics market is still very strong however with the latest generation of cards beating Nvidia's offerings at every single price point. However they have lower margins than Nvidia.

Amd have developed an apu for the next gen of smart tv's and are in talks with the big tv names for deals to provide this chip for their next gen tv's.

If/when these deals go through this is further future revenues.

They are also pursuing other markets and are no longer trying to compete with intel in the high end cpu market and have been downsizing and cutting costs to make the company profitable again.

A pull back on current prices is expected before the Q2 report but I fully expect their share price to hit $10 by the end of the year by the time of the Q4 report.

As I said I'm new to all this but I'd like to hear the opinions of more experienced and educated people on the subject matter.

dartup

intel has better product and intel stock price has not moved in 15 years

BloodBath

It's a shame I'm not talking about intel then isn't it.

Intel shares also cost 5 times as much and amd are just starting to recover from a 4 year low.

They are not comparable.

Do intel make dedicated graphics? Does intel have the contracts for all 3 next gen consoles? Can intels apu's compete with amd's for graphics performance? Outside of the pc market are intel competing in the custom apu market? The answer to all of these questions is no.

You don't want to invest in a company like intel who have barely changed in the last 10 years with little chance of big gains. Amd have had previous highs of $40+ a share and are currently still low considering future revenue projections.

Dubh Geannain

BloodBath wrote: »

A pull back on current prices is expected before the Q2 report but I fully expect their share price to hit $10 by the end of the year by the time of the Q4 report.

You were right about the pull back. Down 12% yesterday after Goldman Sachs downgraded to Sell.

Value Hunter

Interesting company, could really get some momentum behind with the release of these consoles. Definitely has great potential.

Only thing i'd be worried about is if their profit per unit would be that high?

Lets say an average of $30 profit per unit, thats quite large in consoles that will retail for lets say $700 (just a pure guess of the price). Nvidia operate on a profit margin of just 13%, if AMD achieve a 20% margin, to make $30 profit per share they have to sell it to Sony/Microsoft for $150.

I don't think that's a feasible price, considering Sony/Microsoft probably ship their consoles at half the retail price, $350 (again a guess), as the retailers need to make their margins.

To make another estimate I would suggest that AMD ship their units at $50 per unit to the manufacturers, this is a reasonable price which I cant see being largely increase, $75 per unit would be the maximum. This would give AMD a profit of $10 - $15 per unit at a slightly ambitious 20% margin.

I could be open to correction on this, your knowledge of the product is obviously better than mine, and the cpu and gpu are clearly vital to the product so perhaps they could charge a premium

Your estimated units per quarter seem spot on with past console sales

Either way, they should be moving back into profitability and hopefully get some big upswing, since you got in early you should do very well, I might explore some option trades on it

BloodBath

Console developers don't make any profit on console sales. Last gen sony were losing $200-$300 per console despite an initial cost of $600 and microsoft were losing around $100-$150 per unit. They make it back on the games. Still a crazy risky strategy.

This gen isn't as ambitious technically so I don't think they will be losing anywhere near as much, they may even be breaking even. Sony learned their lesson with the disaster that was Cell.

Estimated release prices are in the $500 region for both. You can be sure this is near cost price to them. They will offer cheaper consoles with a monthly subscription.

It's just a case of how cheaply they can fab these custom apus.

Breaking the cost down on the ps4. (My own estimates)

AMD Apu $150
8 gigs of gddr5 $150
Power $30
Thermals $30
Mainboard $20
Case $20
Blu ray drive $20
Wifi $10
Hard drive $50

The retailer don't make much on console sales.

I think these estimates are reasonable and would put the apu's at around $150. What the margins on this are is anybodys guess.

Dubh Geannain

Investors Snub Next-Gen Game Console Chip Maker Just As It Starts Making Money

You wouldn’t know it by looking at AMD’s plunging share price, but the company just had a very successful quarter. Its financial report beat analysts’ expectations and revealed an all-important return to profit after a loss-making Q3 in 2012.

...

The skeptical arguments against AMD are well-known and mainly revolve around observations that the chip maker is failing to steal customers away from either Intel INTC +0.73% or NVIDIA in the wider PC market (which is true), and that the short-term benefit of its console wins was already factored into its share price back in the spring (which is also true). AMD’s own financial forecasts have only reinforced this negative sentiment, by warning investors not to expect much in terms of console profit margins.

There is a counter-argument, however. It just requires a slightly longer-term view.

...

More here: http://www.forbes.com/sites/sharifsakr/2013/10/21/amd-share-price-drop/?partner=yahootix

Down to $3.18 now (a drop of 22% in the last week).

Static M.e.

I like the AMD story, the new consoles have only just been released to market if they will be around for another six years I imagine.

Slightly off topic but related.
Does anyone know can you buy these shares from Ireland without having to go through the "US Internal Revenue Service Form W-8BEN" application process (I'm with TD Direct Investing)?