Everyone loves bargain.
We love that feeling of opening up a secret gem that is ignored by others. Poorly priced vintage Corvette with a little scratches on the quarter panel that you can easily buff out. Large-screen HD TV in the open box area of your local electronics store.
You get the picture.
But even your smartest bargain hunter is not among the investors looking for the “next big thing.” In fact, this presumption of urgency to “get there early” often leads investors astray.
Their emotions have become even better for them, as they have magnified the cause of the short-term shocks of the stock-trading chief drivers.
This will lead to unreasonable expectations and equally unreasonable stock prices.
This leads to unfair marketing.
One of the best examples of unreasonable expectations this year Advanced Micro Devices Inc. (Nasdaq: AMD).
In July, the stock rose sharply from earnings from the growing cryptocurrency mining market. Ethereum is the “next big thing,” and investors think AMD is worth it despite signs that this trend will not last long.
Even Wall Street analysts are blamed for bombing AMD stock amid Ethereum’s appearance, with many raising their ratings and price targets, in fact, not sustainable levels. AMD stock was quickly shot down in over-selling territory, driven by a trend and a wild boom in emotional investment.
At the time, AMD was for a correction to “earners, and a smaller group in the brokerage community began to express concerns about cryptocurrency speculation and traps.”
This week, Morgan Stanley did just that. The brokerage firm said “sales led by cryptocurrency mining for AMD graphics chips will decline by 50% next year, or a $ 250 million reduction in revenue.” Morgan Stanley also predicts that video game console sales will fall by 5.5% in 2018, but that is a drop in the bucket for AMD, and investors are likely to expect this given the age of the current generation of consoles.
You can almost hear the hearts of cryptocurrency speculators broken as AMD stock fell 9% after the report.
The Real AMD
To remember the real reason you need to invest in AMD, we need to look back at 2016. The company caught fire last year when it previewed many new chips, including new ones. chipset processing unit (CPU), Ryzen, and newer. graphics processing unit (GPU), Vega. Both products hold up enough promise, and AMD expects strong sales once the chips are launched.
But both Ryzen and Vega blew the analyzer’s expectations off the water. When they hit the market earlier this year, Ryzen and its sibling chip, called Threadripper, not only outperformed competing chips from Intel Corp. (Nasdaq: INTC), they were also defeated by price. At the same time, Nvidia Corp. (Nasdaq: NVDA) wants its Titan Xp GPU as the fastest in the world, but AMD’s top-of-the-line Radeon Vega Frontier Edition GPU quickly stole the title.
As a result, AMD saw the market share of the desktop PC market increase by almost 45% to the highest level in the last 10 years by 31%, while Intel fell by 69%. It also stole the server and data center market share from Intel through the more popular Threadripper CPU.
And that’s just one of AMD’s core business operations. When it comes to areas like virtual reality, driverless drivers and artificial intelligence, AMD is already in its infancy and ready to become a market leader.
Many of you at this point may be asking: “But what about AMD’s weak earnings report last week?”
And I will face: “What is a weak income report?”
Just look at the numbers. AMD earned $ 71 million in the last quarter of revenue of $ 1.64 billion. This is not the only major expectation on Wall Street, set at a loss of 50 cents per share of the $ 1.31 billion revenue loss. In addition, AMD has strengthened its annual growth forecast from the middle to the teens up to a high 20%.
So why is AMD stock falling almost 20% after such a famous report? Because the company says fourth-quarter earnings will fall 15% in a row (even if that’s another 20% year-on-year increase). Once again, it all comes down to an unreasonable level of bargain hunting, and over-selling.
Investing in Advanced Micro Devices
But good luck to you! This emotional storm left AMD trading at a reasonable discount … and a bargain given sufficient growth potential – AMD expects sales to grow about 17% next year, compared to at 12.3% for Nvidia and one 2.3% for Intel. .
The stock has more than 30% up until next year. How many other big companies, besides Alibaba Group Holding Ltd. (NYSE: BELOW), can you say that?
So, ignore the cryptocurrency hype and focus on AMD’s core products and its potential with leading technologies such as AI and data centers. I do not promise you a smooth ride, but it must be very profitable.