Why is AMD's stock so low?

Question

The stock price of AMD is at 9.76. Around a year ago it was at like 20, two years ago it was at 40 and three years ago it was at 5. Why is AMD's stock price so low?

Answer 1

AMD has been losing market share, largely to NVIDIA, but also there are cyclic pressures. S&P rates it as a Hold, if that is any comfort to you.

In 2004 they had $5billion in revenues, which was $5.8billion in 2005 and $5.6billion in 2006. Eps went from a 24 cent profit (losses before) in 2004, 40 cents profit in 2005, 34 cent loss in 2006. Some think their loss this year will be more like a $ 2.50 loss.

It bought ATI to help out, but acquisitions need assimilation for efficiencies and it may be too soon to affect the bottom line. There is hope to recover, but there is good reason for the decline. You MAY have suffered the worst of it.

I recall a year I was hearing nothing but good about Corning, so I bought. It fell and fell and fell. About the time I chickened out and dumped it, fearing worse things that had gone unreported, it turned around. The result was I bought at the high for the year (at that point) and sold at the low for the year. It subsequently rose to recover and exceed my entry point, but had I held it would have been close to two years to make a profit. Things are sometimes hard to guage. AMD may have come close to the bottom, it is too good and does too much business to join the penny stocks lists. I would recommend patience, but it may take a couple of years to get back to where you came in with it.

Answer 2

It looks to me like AMD got into the market with the plan of undercutting Intel with price. It worked, they lowered the industry standard prices for chips, but you need more than a pricing strategy to be profitable. You have to be able to deliver the product profitably at that price. It appears to me Intel beat them at their own game.