BUY ALERT: Advanced Micro Devices
26th July 2017 |
In last month’s issue of Frontier Tech Investor, I demurred from recommending an investment in the cryptocurrency space because I believed the odds were in favour of Nvidia and Advanced Micro Devices pulling back over the course of this month. While the cryptocurrency space supporting these companies has been incredibly volatile, the shares for these companies have improved nonetheless. But the situation has changed. Today Advanced Micro Devices (AMD) released its 2nd quarter earnings which came in positively on the back of buoyant chip sales, not least because of demand from Ethereum miners.
I’ll be writing more to you in the upcoming edition about cryptocurrencies and about what I’ve learned from my visit to China. However there are three new reasons why I am writing to recommend buying AMD today.
The first is it is looking increasingly likely that Ethereum prices have bottomed. I’m in China right now and from speaking to a number of bitcoin miners I have discovered that they are beginning to migrate over to Ethereum mining because they see more upside in the price. This is good news for chip manufacturers.
The second is that bitcoin’s scaling debate looks like it is coming to a conclusion, so there is potential for additional upside because it will remove uncertainty, and change the level of risk attributed to the market. The third is that the US Commodity Futures Trading Commission (CFTC) announced yesterday that options on bitcoin will be available within three months. That represents a major development for the sector since it introduces leverage and the ability to hedge into the market, which can contribute to greater trade volumes and potentially even more volatility, both up and down.
Combining these arguments, the time is right to initiate a long in AMD with a buy up to price of $18. My target for the next 12 months is $25 and $50 over the next three years.
Cryptocurrencies are a volatile sector so there is always risk attached, but from AMD’s perspective its competition with Nvidia has to be a major consideration, while the constantly evolving market for chips will also represent a constant challenge for every company in the sector to remain competitive. An economic downturn could also threaten the price.
BUY Advanced Micro Devices
Name: Advanced Micro Devices Inc. (AMD) (figures accurate as of last market close 25/07/2017)
Ticker: AMD US
Market cap: $14.6 billion
Last closing price: $14.11
Buy below: $18
52-week high/low: $15.65/5.66
Past performance: |2012: -55.56%|2013:61.25%|2014: -31.01%|2015:7.49%|2016: 295.12|Year to date: 24.43%
All the best,
Eoin Treacy
Investment Director, Frontier Tech Investor
