Analysts from brokerage firms FBR & Co. and Needham chimed in on graphics chip makers Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA), respectively, following the news that Intel (NASDAQ:INTC) is in licensing talks with AMD, to utilize AMD graphics technology in its chip designs. Let’s take a closer look.
Advanced Micro Devices, Inc.
In a research report issued yesterday, FBR analyst Christopher Rolland reiterated a Market Perform rating on shares of AMD, with a $2.50 price target, as Intel is interested in AMDs IGPs embedded into their processors.
From the perspective of neutrality, Rolland observed, “There are no other details regarding the boundaries of the IP deal and the size of the potential cash payment to AMD. For Intel, a potential deal would enable the company to boost the graphics performance in their own chips, or perhaps to use high performance GPUs in areas of data center. While less likely a motivation for Intel, such a deal may also give them IP ammunition just in case NVIDIA decided to renew litigation once their cross-licensing agreement expires in early 2017.”
“For AMD, the implication could be significant as a large cash payment could help relieve them of the debt interest burden from the $2 billion of long-term debt on the balance sheet. Additionally, if AMD were to pay this down and the company no longer had massive amounts of debt interest to service, it may be able to focus on just a few products in the most profitable areas (ex. kill ARM servers?),” the analyst continued.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Christopher Rolland has a total average return of 6% and a 60% success rate. Rolland has a -1.2% average return when recommending AMD, and is ranked #339 out of 3809 analysts.
Out of the 22 analysts polled by TipRanks, 4 rate Advanced Micro Devices stock a Buy, 12 rate the stock a Hold and 6 recommend to Sell. With a downside potential of 17%, the stock’s consensus target price stands at $2.33.
Needham analyst Rajvindra Gill also chimed in on the news, reiterating his Hold rating on shares of NVIDIA, without suggesting a price target.
Gill commented, “NVDA management has been hinting its INTC royalty stream will not be renegotiated for several months, and we believe reports further that notion. Furthermore, we have seen no evidence to date that NVDA will be able to replace the royalty revenue by defending its patents through litigation against Samsung or other parties. Our model was already assuming this royalty stream would not be renewed, but we believe some investors were hoping for either a renegotiated rate, or that the royalty stream would be replaced with a separate agreement. With the royalty earnings tailwind inching closer to expiration, we continue to believe NVDA looks fairly valued.”
According to TipRanks.com, analyst Rajvindra Gill has a total average return of 14.6% and a 58% success rate. Gill has a 11% average return when recommending NVDA, and is ranked #50 out of 3809 analysts.
Out of the 23 analysts polled by TipRanks, 11 are bullish on Nvidia stock, 10 remain neutral, and 2 are bearish on the stock. With a downside potential of 3%, the stock’s consensus target price stands at $31.94.