AMD has pushed back the release of its Kabini processor, but does that justify a slump in stock price?
Advanced Micro Devices (AMD) could delay the launch of a budget processor for PCs. DigiTimes and TechSpot reported that AMD pushed back the release date of Kabini-based Accelerated Processing Units (APU). The news contributed to a recent slide in AMD shares. With AMD now down 10.5% in a month, it might be a good time to assess the company’s prospects in the near future.
The Kabini architecture targets budget computers, and is an important source of income for AMD. Built on a mere 28 nanometers, the processor is quad-core, and consumes just 25W. If AMD does delay the launch, it will benefit Intel (INTC). Lately, Intel’s shares are not doing well either. Despite paying a dividend yielding 4.04%, with consistently strong profit margins every quarter, Intel still expects sales to grow modestly.
AMD is underperforming Intel in the near-term as shown in the chart below, but is still up 42.5% in 2013 compared to 11.4% for Intel. Optimism is high that AMD will benefit from sales of system on chip (SoC) integrated circuits in gaming consoles.
Click on the interactive charts below to see data over time.
The chip delay is not very significant, since only a matter of a few extra months. In the interim, investors can look forward to new graphics card releases and revenue from SoCs. What will matter for AMD is product pricing. If the company can price the budget chip aggressively, it can grow its market share in the PC sector.
Upside story for AMD intact
The drop in AMD shares represents an opportunity for investors. Those who missed its run-up in May, 2013 have another chance to build or accumulate a position in the company. Pent-up demand for new consoles, strong interest in graphics cards, and a multi-year roadmap for APUs all suggest AMD could move higher from here.
Written by Chris Lau. Price data, sales and analyst ratings sourced from Zacks Investment Research.
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