Back to top

Analyst Blog

Advanced Micro Devices Inc. (AMD - Analyst Report) recently announced the pricing of senior unsecured notes aggregating $500 million. These bonds carry a coupon rate of 7.00% and are due to mature in 2024. The offering is expected to close on Jun 16, 2014, subject to customary closing conditions.

Advanced Micro expects to raise $490.0 million from the transaction. The company stated that the transaction proceeds would be used for redeeming its outstanding senior unsecured notes, maturing in 2017. The remaining net proceeds would be used to redeem, repurchase or otherwise retire other outstanding indebtedness.

Moody’s Investor Services – the credit rating agency of Moody’s Corporation – assigned a “B2” rating to the proposed senior notes. Given the diversification of AMD’s business in other growing markets, Moody’s is confident of an improvement in its liquidity profile. The B2 rating carries a stable outlook.

Moody's anticipates steady revenue growth from semi-custom chips in the near term driven by design wins and strong demand for Microsoft's (MSFT - Analyst Report) Xbox and Sony's (SNE - Snapshot Report) PS4 gaming consoles. However, the rating also takes into account the ongoing weak demand conditions in the personal computer market due to tablet cannibalization. The ratings also consider increased competition from Intel (INTC - Analyst Report) and the weak demand in the server market.

However, a more conducive market, increased game console wins, adoption of new products, position in graphics and good execution are expected to pull the company out of the weak PC market.

AMD is the world's second-largest maker of microprocessors. In the last reported quarter, AMD’s top line was better than its guidance, supported by healthy demand for Radeon GPUs and semi-custom gaming APUs. Also, the company’s bottom line beat the Zacks Consensus Estimate by a couple of cents. 

At quarter-end, the company had cash and short-term investments balance of $9.02 billion, up from $1.10 billion in the prior quarter. The company had total debt (short- and long-term) of $2.14 billion on its balance sheet. Additionally, the company paid $200 million cash to GlobalFoundries for the reduction of the "take or pay" wafer obligation commitments for 2012.

We believe that AMD has a strong balance sheet, which will help the company to capitalize on investment opportunities and make strategic acquisitions, further improving its growth prospects. We believe that the senior notes offering will bring down its cost of capital, thus strengthening the company’s balance sheet and supporting its future growth.

Currently, AMD has a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%