Is AMD really all that and a bag of chips?
Posted
Aug 25 2009, 02:38 PM
by
Tobin Smith
Rating:
Tech stocks keep on rolling in this bull recovery. In fact, even tech stocks that languished in the cellar for many years are getting attention these days. On Monday, Aug. 24, shares of chipmaker Advanced Micro Devices (AMD) surged more than 8% after Citigroup analyst Glen Yeung upgraded the company to a "buy" from a "hold." The influential Yeung said his upgrade was based on signs of a stronger relationship between AMD and its main customer, Hewlett-Packard (HPQ).
Bing: More on AMD
But does the AMD and HP bond really make AMD a good stock to own right now, and are there other factors likely to propel AMD shares going forward?
Quite likely, yes.
According to the latest research on corporate and consumer PC purchasing by the ChangeWave Alliance Research Network, the entire corporate IT spending environment is showing signs of improvement, and that includes HP.
On the corporate front, the latest ChangeWave survey shows a dramatically improved outlook for U.S. tech spending in the third quarter. The findings also point to the first uptick in business PC spending in more than 18 months. Hewlett-Packard's planned corporate PC sales are also on the upswing, with planned laptop purchases up slightly, while planned desktop purchases remained steady since the previous February survey.
When it comes to consumers, the latest survey results also show consumer PC buying remaining stable, with laptop purchasing plans up from their January-February lows. The survey also revealed an increase in the number of consumers who say they plan on buying more than one computer. As for HP's consumer appeal, laptop sales going forward appear steady, while there's been a marked improvement in those who plan to buy an HP desktop.
Certainly these bullish findings for both the corporate and consumer PC sectors, and particularly the improvements seen for HP, argue in favor of an improved outlook for AMD's bottom line. Given that AMD has recently won key contracts from Hewlett-Packard, I think we may likely see AMD be on many more buy lists in the future. I also think that the mere fact that HP just recently canceled some of its programs with AMD rival Intel (INTC) is a compelling development for the future of AMD.
In his research note, Yeung said "we see the risk/reward on AMD as favorable." I agree with this assessment, and for this, as well as the other aforementioned reasons, I also like AMD shares here.
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NOTE: At the time of this writing, Tobin Smith did not own shares of AMD.
