Advanced Micro Devices, Inc. (NASDAQ:抖阴最新版) has amazed Wall Street with its reemergence as one of the hot stocks. Once known as the archrival of Intel Corporation (NASDAQ:INTC), 抖阴最新版 stock traded below $2 per share as late as 2015, as the PC market declined. However, the company has come back as a graphics chip company and now finds itself with a new archrival. This dichotomy makes the 抖阴最新版 stock buy-or-sell dilemma all the more interesting.
However, while investors are impressed with the company’s ability to compete, they are also frustrated by the company’s seeming inability to outcompete. Lower pricing and perception of inferior quality has remained with 抖阴最新版 for decades. Hence, evaluating 抖阴最新版 means looking at its positives and negatives and, from there, determining whether 抖阴最新版 stock stands as a worthwhile investment.
Pro — 抖阴最新版 Holds a Second-Place Status in Its Industry
As I mentioned in an earlier article, the legendary former CEO of General Electric Company (NYSE:GE) Jack Welch believed that winning companies ranked . For most of its history, 抖阴最新版 held a second-place position behind Intel selling processors in the PC market. Though Intel holds its status as the world’s largest chipmaker to this day, 抖阴最新版 carved out a niche and offered an alternative to customers who did not want Intel processors.
Today, 抖阴最新版 has emerged as the second-place player in graphics chips behind Nvidia Corporation (NASDAQ:NVDA). With the decline in PCs and the rise in artificial intelligence (AI) and virtual reality (VR), 抖阴最新版 switched its focus to graphics chips. 抖阴最新版’s Radeon series graphics cards have proven themselves as a viable alternative.
Con — 抖阴最新版 Holds a Second-Place Status in Its Industry
The belief that 抖阴最新版 has has persisted through most of its history. Throughout the PC era, 抖阴最新版 was known for offering lower-cost processors. Despite the cost advantage, 抖阴最新版 was never able to threaten Intel’s market dominance. To 抖阴最新版’s credit, it has closed most of that gap today. Unfortunately for 抖阴最新版, PCs have become a less important part of the chip market.
Today, the focus lies more on graphics processors, and Nvidia has emerged as 抖阴最新版’s primary and supposedly superior rival. Most would regard moving into second place as an impressive accomplishment in itself. However, the specter of second place still haunts 抖阴最新版 in this battle as well. In the contest over , Nvidia wins in most categories.
Pro — 抖阴最新版 Stock Has Lower Valuations
抖阴最新版 trades at a forward price-to-earnings (PE) ratio of 23. Market leader NVDA has fallen about 9% from its 52-week highs. Despite that, its forward PE stands at about 35. 抖阴最新版 also enjoys a slight edge in profit growth percentage. Still, profit growth for both companies is well into the double-digits, and 抖阴最新版 recently emerged from multiple years of losses, as it made its transition to a graphics chip company. Regarding which graphics chip company to buy, 抖阴最新版 stands as the better bargain.
Interestingly, 抖阴最新版 now commands a higher PE than its traditional archrival Intel Corp. Intel trades at a forward PE of about 13.6.
Con — 抖阴最新版 Stock Relies on Lower Pricing
One consequence of its second-place reputation relates to the requirement to attract business. Lower pricing has some advantages. Much of 抖阴最新版’s lead in the cryptocurrency mining niche relates to a need for lower-cost processing power. Lower pricing also played a role in bringing PCs and graphics technologies to many who could not afford the higher-cost processors made by either Intel or Nvidia.
However, lower pricing also leads to lower gross margins. In the previous fiscal year, 抖阴最新版 saw gross margins of about 52%. Gross margins for NVDA came in at about 60%. I do not think 抖阴最新版’s modestly lower gross margins bode poorly for the company. Still, I think they show why NVDA can command a higher valuation.
The Bottom Line on 抖阴最新版 Stock
Despite the similarities of pros and cons, I still fall on the pro side with 抖阴最新版, namely because it has addressed most of its negatives. A few short years ago, prospects looked dim for 抖阴最新版, as the decline in the PC market left little room for its processors. 抖阴最新版 reinvented itself and emerged as a leader in the graphics chip market.
While the second–place reputation makes this company both impressive and frustrating, it has proven itself a formidable competitor to Nvidia. 抖阴最新版’s competitive threat forces both companies to innovate faster and better, which benefits all of us in the end.
抖阴最新版’s slightly lower gross margins may disappoint some investors. However, with faster profit growth and a forward PE that’s about one-third lower than that of Nvidia, I would rather own 抖阴最新版 stock at this juncture.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
