Advanced Micro Devices [AMD] has been one of the top performing stocks for quite a while. This chip maker has been a money spinner for investors, gaining over 400% in the last 30 months.
The stock was up a mind-boggling 1850% between Nov. 2015 and Sep. 2018. However, AMD shares have declined close to 40% since the start of Oct. 2018, wiping out significant investor wealth.
So, does this mean AMD’s impressive stock rally has come to an end or is it another opportunity for investors to buy the stock? Despite the recent pullback, AMD is still one of the best performing tech stocks this year.
So why did AMD shares plummet?
AMD has been a Wall Street favorite for a while. So what has been behind AMD’s wild ride in 2018? Chip redesign efforts have benefited the company, driving shares to its 10-year high. The stock rallied close to 300% in the first nine months of 2018 and is now up 85%.
The primary catalyst of the sell-off has been weak third-quarter results for AMD. While sales rose 4% to $1.65B, it was marginally below analyst estimates. AMD forecast revenue of $1.45B for the fourth quarter, which was a bigger miss considering estimates.
The broader tech sell-off witnessed in Oct. also contributed to AMD’s price drop. This coupled with a bear run in the crypto market leading to decreased demand have contributed to a weak earnings forecast.
Chip revamp drove AMD to 10-year highs
AMD’s management oversaw the redesign of the company’s chip lineup and focused on improved product performance. There were encouraging reviews of AMD’s Ryzen chip for personal computers, Epyc chips for servers and Vega graphics chips.
Initially, sales rose 29% to $5.1B this year while net income rose to $299M, up from a net loss of $14M in the same period last year. However, a large part of this increase in sales was driven by the unsustainable boost in the crypto market.
With the crypto market declining 80%, this demand has also slumped for AMD chips that showed up in the company’s recent quarter. According to AMD, graphics sales in crypto mining accounted for 10% of sales in the third quarter of 2017. Comparatively, the crypto graphics vertical has contributed a negligible amount in Q3 2018.
Intel getting back in line
AMD’s rise in stock price was also driven by Intel’s CEO resignation in June 2018. Intel [INTC] has been struggling to revamp its manufacturing process for a while now. Earlier this year Intel also admitted that its much-awaited 10-nanometer chips will be available in large volumes by the end of 2019.
In fact, Intel’s 10-nanometer chips have been long delayed. The company was slated to launch them back in 2015. AMD’s shares spiraled upwards from $19 to $34 over the next few weeks post Intel’s announcement.
Investors expected this delay by Intel to drive incremental chip sales for AMD. However, Intel has now released information that it would launch chips that will be far ahead of competitor products.
Analysts believe AMD could not quite leverage Intel’s challenges to its benefit. In case Intel’s expected chip products make a strong comeback, AMD’s stock might decline further.
How do analysts view AMD?
The last time AMD’s stock rallied 1300% (between Oct. 02 and Mar. 06), the stock came crashing down and declined 96% over the next two and a half years. Piper Jaffray analyst, Craig Johnson stated, “History may not always repeat, but it does tend to rhyme…….These kind of parabolic advances really only end one way — poorly. From my perspective, I’m not chasing that stock here. I’ll wait for it to come to me.”
Some analysts believe the stock to be overvalued at current prices. It’s currently trading at 58x forward earnings way above the industry average of 14x. The 31 analysts tracking AMD, have an average 12-month price target of $24.17 for the stock. This indicates an upside potential of 27%.
CHART: How Blockchain Powers Bitcoin
Blockchain, Bitcoin. Bitcoin, blockchain.
The two terms go hand in hand—and have become almost ubiquitous with this year’s insane rise (and fall) of Bitcoin.
But what does it all really mean? How does it come together? In this week’s chart, our friends at CB Insights break down exactly how blockchain powers Bitcoin.
This Mogul Became America’s 1st Black Billion-Dollar Businesswoman
Where to start?
She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.
She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.
Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.
In honor of Black History Month, let’s dive into her remarkable career.
- Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
- Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
- Per Forbes, Johnson has an $820M net worth as of 2019
Foray into real estate…
After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.
“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”
As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.
“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”
So what does that mean?
“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.
“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”
And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.
Forbes: “Everything [she] touches turns to gold.”
That’s a real quote. From Forbes. Last year. It’s also true.
BET? Billion-dollar exit. Washington Capitals? Stanley Cup.
And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)
Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.
Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”
So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.
Breaking glass ceilings.
There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.
“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”
She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”
Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.
“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.
“And it’s just really, really important that they really take a look at this.”
VIDEO: How Far Does $150K A Year Get You In New York City?
No matter what metric or list you look at, it goes without saying: New York City is one of the most expensive places in the world to live in.
In this video, CNBC spoke to a Millennial who runs her own brand consulting agency and wants to #WealthHACK her way to retirement by 40.
She makes $150K a year. But how far does that actually get her? Check it out.