Did Advanced Micro Devices, Inc. (AMD) Overshoot Expectations at Analyst Day? Susquehanna Weighs In

Two days ago, Advanced Micro Devices, Inc. (NASDAQ:AMD) hosted an Analyst Day in its headquarters in Sunnyvale, California, where the company’s management offered updates on long-term goals, leading shares to drop nearly 12% for the chip maker. In reaction, Susquehanna analyst Christopher Rolland maintains a Hold rating with a price target of $12, which represents an upside close to 7% compared to where the shares last closed.

The chip maker has never been better positioned in terms of competitive advantage in the semiconductor industry. Among various product updates discussed during the analyst meeting, AMD announced top five PC Original Equipment Manufacturers (OEMs) will kick off Ryzen-based systems as of next quarter. The analyst highlights, “While sales for Ryzen thus far have been only for standalone parts sold to enthusiasts, AMD noted that the top five PC OEMs will be launching Ryzen-based systems in 2Q17.”

Additionally, the semiconductor company seems deeply enthusiastic about Naples, and hopes to reach a double-digit share within the server market. Considering today’s share stands at approximately zero, Rolland points out he “would consider 5% a more realistic victory.” AMD also expressed it intends to reach a double-digit growth rate for its revenue over the next 3 to 4 years, and it would offer by then a bigger basket of premium products, which would enhance profitability.

Overall, the company’s management’s updates are “aggressive.” The target for gross margin is set to reach 36% by 2018 and is expected to rise to a range of 40%-44% by 2020, compared to an estimate of 36%-40% previously. However, the analyst underscores concerns, warning “that the company has been unable to get close to this previous target.” AMD also increased its long-term EPS goal from $0.50 to over $0.75 per annum. Moreover, the semiconductor company projects a total available market of $28B for PCs by the year 2020, along with $15B for Immersive and $21B for Datacenter.

“However, with the stock trading at 35x our CY18 adjusted EPS estimate, we think much of the goodness is already priced in. We remain on the sidelines for now and look to become more constructive if AMD begins to gain significant traction with its new product initiatives,” concludes the analyst.

According to TipRanks, a financial engine that measures and ranks analysts’ and bloggers’ performance, Christopher Rolland is ranked #400 out of #4561 analysts. Rolland has a 64% success rate and generates an annual yield of 9.3%. However, when recommending AMD, the analyst earns a -1.2% average profit on the stock.

TipRanks analytics show AMD as a Hold. Based on 15 analysts offering recommendations for this share, 5 issue a Buy, 8 maintain a Hold and 2 recommend a Sell. The 12-month average price target stands at $12.64, making a nearly 13% upside from where the stock is currently trading.

  • CPUsAreHistory

    AMD is completely redefining its fundamentals as we speak.

    If the analyst does not understand technology, then they lose all the potential profits from a company that is in full fledged recovery. AMD is not a new company trying to grow… It is a company that had some problems implementing some very high-performance and complex architectures.

    AMD has double the TAM areas of Intel and NVIDIA, and with its new CPU, GPU, APU architectures in the servers, artificial intelligence, computing, emebdded, workstations, laptops/mobile, etc., its going to recover all its market share and a lot more.

    In short, analysts that don’t understand the technology that is being delivered by AMD as we speak, would have lost the 400% to 600% profit run that AMD had last year..

    2017 is the year that AMD releases its major high-end CPU, GPU, APU, HBCC memory cache controller, Infinity Fabric, etc.. architectures in all areas of computing.. Something that Intel and NVIDIA can’t do because they only cover one area..

    Anybody who follows analysts that don’t understand the implications of high-end technology being released just causes naive investors to lose their profits while big investment companies buy AMD by the troves..

    By the way, Intel licensing of AMD intellectual property is only good for Intel.. AMD is the only company that have HSA native CPU/GPU fused architectures, so Intel is doomed because they can’t develop one without high end GPU technology and NVIDIA is just a GPU company..

    For anybody in the technology area and that understands the impact of what AMD is releasing, AMD is going to rake the computing and gpu markets.. AMD doesn’t even need to have the fastest products to make huge profits from the CPU and GPU TAMs, even though, it already exceeded the performance of all Intel products with their current RyZen and the incoming products..

    Intel will buckle under AMD new products since CPU only architectures are dead, and APU new architectures that can schedule CPU cores, GPU cores, FPGA cores, AI cores, etc.. will become the future of computing.. and again.. only AMD has been able to achieve a native HSA processor architecture that when the HSA compilers become the norm, the applications performance will even scale further..

    NVIDIA is a great company and AMD is back again as a great company that will regain its proper market share with no problem since AMD’s price/performance products are superior that NVIDIA’s and AMD is not force proprietary products like NVIDIA does..