Why Advanced Micro Devices (AMD) Stock Is Gaining Today

Tickers in this article: AMD

NEW YORK ( TheStreet) -- Advanced Micro Devices AMD was gaining 1.4% to $4.27 Tuesday after announcing a line of SSDs aimed at PC gamers.

The new SSDs carry the AMD Radeon R7 Series brand and are the result of a partnership with Toshiba's OCZ Storage Solutions . The line includes 120GB, 240GB, and 480GB drives with read speeds of 550MB/s and write speeds of 470 MB/s for the 120GB drive and 530 MB/s for the 240GB and 480GB drives. The high-end 480GB drive also has a Max Randon Read IOPS of 100,000.

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TheStreet Ratings team rates ADVANCED MICRO DEVICES as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ADVANCED MICRO DEVICES (AMD) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.0%. Since the same quarter one year prior, revenues rose by 24.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ADVANCED MICRO DEVICES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ADVANCED MICRO DEVICES continued to lose money by earning -$0.11 versus -$1.59 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$0.11).
  • 37.96% is the gross profit margin for ADVANCED MICRO DEVICES which we consider to be strong. Regardless of AMD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMD's net profit margin of -2.49% significantly underperformed when compared to the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The debt-to-equity ratio is very high at 4.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AMD's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: AMD Ratings Report

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