3 Reasons Not to Buy Advanced Micro Devices, Inc. (AMD)

Semiconductor manufacturer Advanced Micro Devices, Inc. (NYSE:AMD) has been trading on the cheap lately. It has the trappings of an appealing value play, but there’s a lot more to AMD than meets the eye. Here are three reasons why it’s probably best to stay away from this stock.

1. The PC’s no longer the thing
As proven most recently when Dell Inc. (NASDAQ:DELL) went private, personal computers have taken a backseat to the mobile phone and tablet. Even heavyweights like Microsoft Corporation (NASDAQ:MSFT) and HP are taking a hit in computer sales, and for a company like Advanced Micro Devices, Inc. (NYSE:AMD), which has put extra emphasis on building semiconductors for personal computers, this change in the wind could cause setbacks for some time to come.

Advanced Micro Devices, Inc. (NYSE:AMD)AMD isn’t the only company struggling with this. Its greatest rival, the much larger Intel Corporation (NASDAQ:INTC) , has suffered its share of weaker-than-expected earnings calls lately. As fellow Fool Anders Bylund put it, the fact that both companies are struggling (as opposed to one triumphing over the other) is a sign that something has gone deeply awry in the world of IT.

2. A dismal past year
Besides a turn in the tech tide, Advanced Micro Devices, Inc. (NYSE:AMD) has had to answer for some dreary recent financial statements. The company saw a 17% drop in revenue during 2012, along with operating and net income losses of more than $1 billion each.

AMD isn’t just dwindling in sales. Its profit margins show that last year, the company was producing its goods inefficiently. During its most recent two quarters, AMD has additionally burned $239 million worth of cash. It’s difficult enough for a company to adapt to changing trends if its business structure is stable. AMD’s weak financial skeleton could make any change in the tech climate seem like a fatal blow.

3. Downgraded rating
Because of the business’ recent financials, Advanced Micro Devices, Inc. (NYSE:AMD) was recently given a downgrade by the Fitch Ratings agency. Fitch based its assessment on a belief that the company’s lack of cash flow would drive AMD to its “minimum operating level.”

A low rating is probably the least of AMD’s worries at the moment, but it can immediately affect its stock price, as it signifies the market is growing wise to its struggles. In this case, AMD’s price dropped 2.6% to $2.67 after its downgrade. It’s a small drop, but a drop nonetheless, and currently AMD isn’t doing much to prove it can shake it off.

The article 3 Reasons Not to Buy Advanced Micro Devices, Inc. (AMD) originally appeared on Fool.com and is written by Caroline Bennett.

Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!