Advanced Micro Devices, Inc. (NASDAQ:AMD) is not a value pick as the stock is not cheap. Despite improving its numbers on balance sheet, its debt load still creates uncertainty over the firm’s growth forecasts. Vega GPUs and Ryzen CPUs are “expected” to offer meaningful earnings growth but notable risks remain. The long-term chart depicts the stock is trading above its long-term mean following strong gains in 2016.
The key thing that may disturb Advanced Micro Devices shareholders is its debt load. The company has a debt-to-equity ratio of 4.23 which in 2014 was a massive 10.88. This much debt for a firm is like carrying immense weight in bags. It is extremely tough to compete against the peers which have successfully preserved unspoiled balance sheets in the long-term. Short-term wins happen but generally sooner or later, the related debt load impacts the firm’s performance, particularly when an unanticipated misstep knocks in.
However, it is not merely the debt load where the firm is struggling. The earnings have failed to come in green since 2012 although this fiscal it is projected to report positive earnings. Advanced Micro stock rallied strong last year which has led in positive sentiment across board. Nevertheless, the easy money has already been booked here.
The company can record some growth reasons in 2017 in the form of Vega GPUs and Ryzen CPUs. Many ardent investors who follow the company will be fully aware that the company has over-promised compared to its actual deliverables. Ryzen is projected to contend against Intel’s core processors and early analysis on its Vega 10 GPU demonstrate that its memory outperforms significantly GDDR5 by some distance.
Though, Vega’s predecessor Polaris failed to live up to its billing, and as a result the company saw Nvidia gaining increased market share in this segment recently. It is the reason investors should not get carried away from hypes too often.