There’s Too Much Optimism Around Advanced Micro Devices, Inc. (AMD) Stock Now

Due To The Huge Run Last Year, Investors Are Overly Bullish

Sentiment is illustrating to me that the market is pricing in meaningful gains in the GPU market, which in the end may not materialize. If we look at the sentiment chart, we can see that the stock reached bearish sentiment levels of 7 at the start of 2015 but now it has a reading of 35. In fact, sentiment reached the highest point in the company’s history last month which illustrates to me that investors are just too optimistic about Advanced Micro Devices, Inc. (NASDAQ:AMD)’s future growth potential. On the contrary, I look at the facts which state the company’s debt to equity ratio is still 4.23 despite coming down in recent times. Carrying this much debt on the balance sheet is risky especially considering the volatile nature of this industry. Any fundamental setback could derail the company’s growth prospects and adversely affect its cash position. No dividend, high debt and a history of negative earnings all elevate risk, especially after the huge bull run the stock had in 2016.

Summary

Although Advanced Micro Devices, Inc. (NASDAQ:AMD)’s growth prospects look encouraging, there is no way the stock can repeat its performance (2) in 2016. There are still major doubts whether its Ryzen CPU and Vega GPU areas can produce the growth that many investors are expecting. Its balance sheet also remains an issue. Big debt payments are on the horizon soon, so it will be interesting to see if the balance sheet can remain intact.

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The article There’s Too Much Optimism Around Advanced Micro Devices Inc (AMD) Stock Now originally appeared on amigobulls.com. Watch our analysis video on AMD

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Additional Links:

(1) http://www.forbes.com/sites/greatspeculations/2016/10/19/strong-polaris-gpu-sales-likely-drove-amds-top-line-higher-in-in-the-quarter/#70568c0935db?ref=il

(2) http://amigobulls.com/articles/will-2017-be-another-blockbuster-year-for-advanced-micro-devices-inc-amd-stock?ref=il&ref=im

(3) http://amigobulls.com/stocks-to-buy/top-tech-stocks/?ref=il&ref=im