Amongst the technology stocks that we cover, AMD (NYSE:AMD) has showed one of the most significant declines over the past week. Below we take a quick look at what is causing broader market declines and how AMD fits in.
Our price estimate for AMD stands at 9.48, implying a premium to market price.
Questions Over Economic Recovery
A Reuters article states:
“The standoff between U.S. President Barack Obama and congressional Republicans over raising the government’s borrowing limits is casting a shadow over the economic recovery, which has hit a temporary soft patch,” a top Federal Reserve official said on Thursday. [1]
The Federal Reserve chairman commented that the U.S. economic recovery is occurring somewhat slower than expected. [2] What has made things worse for investors is that there seems to be no hint of further Federal stimulus. [3] The economic indicators look weak with high unemployment rates still lingering. [3]
AMD Has High Leverage
AMD has high leverage, meaning that it has a relatively high amount of debt compared to its market value. Such stocks tend to have highers sensitivity to market movements. One effect here is that AMD has shown greater recent declines than the overall market. We believe that this is related to macro conditions rather than company-specific issues. Therefore we expect the stock to recover over time.
See our complete analysis for AMD’s stock here
Notes:- Fed’s Plosser-economic weakness temporary, Reuters, Jun 9 2011 [↩]
- Wall Street extends losses after Bernanke’s speech amid economic concerns, news.xinhuanet.com, Jun 9 2011 [↩]
- ref:3 [↩] [↩]
