Sept. 25, 2016 12:11 p.m. ET
The oft-beleaguered chipmaker’s share price has more than doubled since the start of the year, making it the top gainer in the PHLX Semiconductor Index for that time. That can be credited to improving financial performance and hopes for a new family of chips designed for servers, PCs and videogame consoles. Most of the chips aren’t expected to launch until next year.
PCs and servers aren’t easy markets to crack, given the dominance of Intel
. But despite the recent share gains, expectations for AMD are relatively modest. Wall Street is projecting revenues to rise just 3% this year and 5% next year. That follows a 28% drop in sales last year as the company focused on development of its new products.
AMD’s stock is at its highest level in more than four years, which may look risky given uncertainty of how the new chips will actually sell. But the company’s financial health has improved. A recent offering of stock and convertible debt raised about $1 billion, which will help pay down existing debt. Though the offering dilutes existing shareholders, Stacy Rasgon of Bernstein estimates that the move also pushes out maturity on current debt to approximately 2022 and helps remove the specter of bankruptcy from the company’s image.
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All that has made AMD a less attractive target for short sellers. Short interest on the stock has fallen from 15% at the start of the year to less than 8% now, according to FactSet. Given AMD’s challenges, it helps to have a few less chips stacked against it.
Write to Dan Gallagher at [email protected]