The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

AMD Stock Outlook

Summary:

The Q2 2017 earnings report of AMD proved just how valuable is Ryzen to the company’s topline and bottomline growth.

Ryzen’s release earlier this year is definitely why AMD’s Computing and Graphics segment posted a 51% Year-over-Year increase in Q2.

Ryzen is helping improve the average selling prices of AMD’s x86 processors. Ryzen is notably helping it steal market share against Intel’s desktop processors.

Intel’s recent shutdown of some its Internet of Things products/segments are likely to help it focus on its core x86 business. This was to better address the new threat posed by AMD.

After so many weeks of waiting, I Know First finally has positive near-term, medium-term, and long-term algorithmic forecast for AMD.

Advanced Micro Devices (AMD) reported its impressive Q2 earnings numbers last July 25. The stock surged up and then dipped post-earnings. It wasn’t disappointment. It was profit-taking. AMD’s current management deserves salutations. They are doing a great job. The Q2 numbers were outstanding. AMD finally has its mojo back.

(Source: AMD/Motek Moyen)

On a Non-GAAP basis, AMD’s net income for Q2 is $19 million. This is massive comeback compared to the $40 million net loss Non-GAAP on the year-ago quarter. AMD’s Q2 revenue was also 18.45% Year-over-Year higher. The non-GAAP operating income of $49 million is more than 1,600% higher than last’s year number of $3 million.

Q2 is just the first quarter that AMD started selling its first batch of 14-nanometer Ryzen processors. The stock therefore has a lot of upside potential. It may be a rollercoaster ride but AMD is unlike to drop below $12 again this year. Ryzen, EPYC, and Threadripper’s release this year is definitely making Intel (INTC) uncomfortable. So much so that Intel decided to shut down its wearables and other Internet of Things-related products/processors.

Ryzen’s release last March/April is definitely why AMD posted a 51% increase in its Computer And Graphics segment during Q2 2017. It could have been higher if AMD was able to release the high-end Radeon RX Vega earlier this year.

Strong console sales are also likely why that particular segment went up 44% quarter over quarter. The AMD-powered PlayStation from Sony (SNE) was the number one selling console in May and June, handily beating the Tegra-powered Nintendo (NTDOY) Switch.

(Source: AMD)

Ryzen Is AMD’s First Hammer Against Intel

Let us focus on Ryzen. I think this desktop-grade processors is going to help AMD take back the market share it lost to Intel over the last six years. Even though the more affordable (but competitive in performance) Ryzen 7, Ryzen 5, and Ryzen 3 processors aren’t going to get margins as high as Intel’s Core i-Series CPUs, market share gains will inspire investors to keep rallying around AMD. AMD doesn’t really need to match the high-margin pricing of Intel right now. What it needs is to keep taking away market share from Intel on the desktop processor market.

Retail and institutional investors are eager to see if Ryzen has long-term appeal on consumers. Based on Q2 numbers, Ryzen is playing a very important role in AMD’s great comeback in processors. It is the first hammer that’s waking up Intel out of its complacency. Before the Ryzen was released, AMD’s market share was only 18.10%. Ryzen arrived and AMD’s share went up to 22.60% on desktop processors.

That’s an incredible 21.5% boost in span of a very short period time. Further, AMD only released the more expensive Ryzen 7 and Ryzen 5 processors. People snapped them up. This confirmed that AMD can compete against Intel in the high-end and mid-class range of processors, not just on low-end CPUs.

(Source: PassMark)

Now that AMD has released the entry-level Ryzen 3 processors, I expect it to gain market share faster this year. By end of 2017, AMD will most likely have 28% market share in desktop/laptop x86 processors. AMD’s stock price will probably experience another bull run if it could get from 22.6% to 28% market share on desktop processors before 2017 ends.

In short, AMD is going to use low-pricing to keep the pressure on Intel on consumer-grade processors. Ryzen is the first hammer. The second hammer is Threadripper, a CPU intended for high-performance consumer tasks such as those work done by video editors, animators, and 3D modelers. Threadripper is targeted against those Core i7 processors that Intel sells for workstation PCs and gaming rigs.

In other words Ryzen and Threadripper will hammer down Intel’s x86 dominance on both the entry-level and high-end market segments. Ryzen 3’s entry level price of $109 means it is going to hurt Intel $145+++ Core i3 sales pretty quickly. I repeat, Ryzen’s importance is that it will help AMD retake market share that it lost to Intel. AMD needs consistent growth in market share on desktop processors to keep investors loyal and interested on its stock. Without significant market share gains, investors will prejudged Ryzen as a flop product.

Conclusion

I have waited patiently for many weeks. I’m glad that I Know First now finally has positive algorithmic forecasts for AMD. Last week, I Know First’s computers were saying AMD was not a Buy so I refrained making a go-long article here. However, now that I Know First’s stock picking computers agree with my optimistic outlook for AMD, I am proud to endorse this stock as a buy.

Investor confidence will likely go up again on AMD after they read the report that the high-end consumer processor Threadripper is actually an EPYC 16-core server-grade processor in disguise. AMD is now selling server-grade processors to big spending PC builders/buyers. I expected the Threadripper to be a souped-up Ryzen 7 or Ryzen processor but AMD apparently wants desktop PC users to use an EPYC CPU.

This is a good strategy just in case Intel fights tooth and nail to prevent 32-core EPYC processors from also taking away market share in the server-grade processor market. AMD can still sell many EPYC processors under the consumer Threadripper trademark.

The weekly and technical indicators are all favorable for AMD. Buy it now or wait for a cheaper entry point, it’s your choice. What matters most is that you go long on AMD while it is still trading below $16.

(Source: Investing.com)

Past I Know First Forecast Success with AMD

I Know First has made accurate predictions on AMD in the past, such as its bullish article published on August 14th, 2016. In the article, it explains that the mass-market pricing tactic being used for Polaris GPUs should further accelerate AMD’s hell-bent campaign to regain the GPU market share it lost to Nvidia in 2015/2014. During the time period starting on August 14th, 2016 until now (July 30th, 2017), AMD shares have increased by 107.28% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: AMD)

This bullish forecast for AMD was sent to I Know First subscribers on August 14th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.