After attending one of the key semiconductor’s symposiums on high-performance microprocessors and microcomputers, top analyst Matt Ramsay at Canaccord is chiming in on three of the industry’s biggest chip makers: Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA), and Intel Corporation (NASDAQ:INTC). From Ramsay’s eyes, the Hot Chips conference has bolstered his confident case for AMD thanks to Ryzen and EYPC server momentum as well as points full bullish steam ahead for NVDA on back of strong datacenter demand. However, though Intel’s near-term glimmers with compelling promise from its Core X-series of desktop processors to its Purley/Skylake server platform, PC keeps one of Wall Street’s best performing analysts on the sidelines.
Matt Ramsay has a very good TipRanks score with a 65% success rate and a high ranking of #59 out of 4,633 analysts. Ramsay garners 23.6% in his yearly returns. When recommending AMD, Ramsay gains 45.0% in average profits on the stock. When recommending NVDA, Ramsay earns 132.3%. When recommending INTC, Ramsay yields 10.9%.
Let’s dive in:
Advanced Micro Devices: Risk/Reward Leans to Favorable Upside
AMD may be a stock that carries along with it risks for roadmap execution or the sheer intensity of the cutthroat chip maker arena- but from where Ramsay is standing, especially on the heels of Hot Chips talks, momentum favors this chip giant’s success.
The analyst reiterates a Buy rating on AMD stock with a $20 price target, which represents a 63% increase from where the shares last closed.
Taking under account positive conference chatter coupled with industry and consumer checks that show AMD’s business is gleaming with potential, encouragingly, there is real “[…] momentum building for Ryzen desktop and now for EYPC server products, strong crypto-currency and solid gaming GPU demand overcoming modestly disappointing power/performance metrics from new Vega GPUs against tight product supply and a strong roadmap moving to 7nm across the portfolio during 2018. While we raise our Q3/17 estimates slightly and remain well above consensus for 2H/18 and for long-term AMD revenue and earnings estimates, we believe consensus estimates for Q4/17 and potentially Q1/18 may be slightly too aggressive given tougher gaming console compares and seasonality combined with an EYPC sales ramp we anticipate will accelerate meaningfully during 1H/18 versus sooner given the server adoption cycle and strong early traction with customers and partners. Finally, our industry checks indicate 7nm chip development timelines remain intact for what should prove even stronger products across AMD’s roadmap versus Intel during 2H/18 and 2019,” contends Ramsay, who banks on AMD’s reward outweighing its risk.
Looking ahead, not only does the analyst believe AMD can realize his long-term projection of $1.00 plus in EPS within three years, but he wagers his bullish expectations are “exceedable.”
Where does this top analyst’s conviction sound off against the word of the Street? Cautious optimism circles the chip maker, as TipRanks analytics exhibit AMD as a Buy. Out of 20 analysts polled by TipRanks in the last 3 months, 9 are bullish on Advanced Micro Devices stock, 8 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 19%, the stock’s consensus target price stands at $14.54.
Nvidia’s Solidifying Its Spot as a GPU Computing Leader
Sure, gaming matters, but it’s merely “just one important piece” of the puzzle for an overall bullish Nvidia story, argues Ramsay, who sees this chip giant coming out strong amid a GPU computing battleground. Another key element of Nvidia’s story points to its robust datacenter, which has Ramsay increasingly confident, especially in terms of competitive pricing. Add in automotive, where Nvidia’s Drive PX platform revs compelling value as “a top contender in the race to autonomous vehicles,” especially with a new Toyota collaboration under a growing “franchise leadership,” and Ramsay pinpoints various growth prospects ahead for the company.
In reaction, the analyst maintains a Buy rating on shares of NVDA with a price target of $190, which implies a just under 15% upside from current levels.
Ramsay asserts: “[…] we believe NVIDIA’s emergence as a GPUcentric platform computing company (of which gaming is just one important piece) is now cemented. Further, while conversation about increased competition from the Xeon Phi roadmap at Intel, FPGAs, new Vega/Navi GPUs from AMD and particularly in-house ASICs for datacenter acceleration continues to increase, we remain very impressed how quickly NVIDIA has segmented the product roadmap to provide more application-specific silicon to both the quickly evolving datacenter and automotive markets. As such, while we anticipate competition will increase in these exciting new markets and sustain from AMD in gaming, we believe NVIDIA’s thought leadership and both software R&D and nnode silicon scale will deliver above-consensus growth. Specifically, we anticipate strong Q/Q growth to resume in the OctQ for datacenter sales bolstered by strong V100 demand and increased supply.”
Following the Hot Chips industry conference, the analyst has boosted his projects “yet again” for the giant, anticipating datacenter sales hitting upon well past $5 billion are achievable within three years from the company’s current $1.7 billion run rate. For fiscal 2018, the analyst has boosted non-GAAP EPS from $4.09 up to $4.12, and for fiscal 2019, the analyst has lifted non-GAAP EPS from $4.69 up to $4.74.
When it comes to Wall Street’s perspective, Ramsay’s not the only bull in the chip giant’s corner, considering TipRanks analytics demonstrate NVDA as a Buy. Based on 25 analysts polled by TipRanks in the last 3 months, 16 rate a Buy on Nvidia stock, 6 maintain a Hold, while 3 issue a Sell. The 12-month average price target stands at $156.42, marking a 4% downside from where the stock is currently trading.
Intel Faces Rising Direct/Foundry Rivalry Despite Offering Enticing Roadmap
Of the chip makers at the Hot Chips conference, Intel is the only one of the three that has Ramsay playing it safe. Though these shares provide a stellar yield and are reasonably priced, the company’s dipping PC revenue will continue to be its Achilles’ heel, with server growth rates continuing to be sub-10% yearly.
Therefore, the analyst reiterates a Hold rating on INTC stock with a $38 price target, which represents a close to 8% increase from where the shares last closed.
Ultimately, Ramsay highlights “[…] an increasingly segmented server/PC product roadmap,” adding, “while we believe this finer segmentation will take time to be digested by investors, feedback from Intel customers has been largely positive with the exception of AI software ambiguity. Nearer term, while we believe the Core X-series of desktop processors, first Cannon/CoffeeLake notebook chips and the Purley/Skylake server platform are impressive and incrementally expand the breadth of Intel’s portfolio at the high end of its served markets, we maintain our HOLD rating and slightly below-consensus estimates as we continue to believe Intel’s PC revenue will remain in a modest secular decline and Intel’s server growth rates will remain sub-10% annually. […] we believe shares could remain range bound until investors see proof investments in 10/7nm, FPGAs, auto, IoT and memory will generate strong returns within a reasonable time horizon and margin structure.”
For the rest of the year, the analyst expects PC sales to decline roughly 0.3%, taking another approximate 3.2% spiral downturn next year, considering TAM is mostly flat when trying to compete against new AMD products. Additionally, the analyst forecasts DCG growth of 6.8% for this year and 7.9% for next year- which notably falls under the company’s low-double-digit expectation for the long-term. Ramsay anticipates the INTC team’s long-term outlook for DCG growth will prove to be too “aggressive.”
The Street has a mixed take on this chip giant. TipRanks analytics showcase INTC as a Buy. Out of 24 analysts polled by TipRanks in the last 3 months, 12 are bullish on Intel stock, 8 remain sidelined, and 4 are bearish on the stock. With a return potential of nearly 13%, the stock’s consensus target price stands at $39.68.