Red flags were thrown up by Bernstein analyst Stacy Rasgon regarding the prospects of leading chip maker  Advanced Micro Devices, Inc. (NASDAQ:AMD). The analyst downgraded the stock from Market Perform to Underperform, while reiterating a $3.00 price target, which implies a downside of 40% from current levels.

Rasgon highlight the reasons for his caution stance: “1) Q1 PC upside was likely due to Bristol Ridge channel fill, not necessarily sustainable demand (a pattern we’ve seen before), 2) disclosure that at least one ‘new’ semicustom win is in fact a console (suggesting new wins might not be entirely additive), 3) the fact that Zen is not likely to ramp materially for about a year in servers, and we have little to go on regarding performance other than PowerPoint slides (we’ve been here before, recalling the Bulldozer hype, and subsequent collapse, with clarity). And finally, Street numbers appear to get more aggressive as the year progresses; given increased expectations we suspect consistent beats will be needed from here.”

The analyst concluded, “Timing is challenging and the call is (as always) risky, but we suspect downside over the next few quarters is likely, and when it cracks it tends to do it rapidly (given bull cases tend to be built on ‘hopes and dreams’ for what it’s worth valuation is currently at levels not seen for almost 10 years.). One may need to be prepared for it to go up before it goes down, but on the balance we think eventual downside surprise is more likely than sustained upside, with a greater potential return.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Stacy Rasgon has a yearly average return of 2.8% and a 51% success rate. Rasgon has a -2.3% average return when recommending AMD, and is ranked #1158 out of 4018 analysts.

Out of the 21 analysts polled by TipRanks, 6 rate AMD stock a Buy, 8 rate the stock a Hold and 7 recommend a Sell. With a downside potential of 32%, the stock’s consensus target price stands at $3.37.