J.P. Morgan Raises Estimates for Advanced Micro Devices, Inc. (AMD) Following 2Q:16 Results

Following an unexceptional second-quarter earnings report from California multinational semiconductor developer Advanced Micro Devices, Inc. (NASDAQ:AMD), J.P. Morgan analyst Harlan Sur reiterated a Hold on the stock, with a $6.00 price target. Though he has raised his estimates, the analyst foresees limited upside for AMD.

AMD just revealed that for the second quarter, earnings per share were $1.03B with a loss of $0.05, above the Street’s predictions shooting for $0.96B with a loss of $0.08, but aligned with Sur’s expectations for a loss of $0.07. Sur notes that from quarter to quarter, AMD has increased guidance for revenues for the upcoming third quarter by 18%- an upturn ahead of the Street’s forecast for progression of growth for the company, with the upcoming holiday season in mind as far as high game console demand as well as a predicted upsurge for graphics processing unit product sales.

Even with reliance for strong third quarter sales from holiday console gaming demand, fresh generation of revenue from semi-custom business designs, and an increase in graphics processing unit sales- as far as the bigger picture is concerned, the analyst highlights that AMD management itself has modest expectations for minor single-digit year-to-year growth in revenue.

Sur has questions as to how AMD can regain market share in a sphere dominated by central and graphics processing unit competitors; but he acknowledges a greater competitive edge to AMD’s product base than investors have seen in the past few years. There lies opportunity for a product pipeline of PC- oriented Zen central processing coupled with graphics-minded data center/Vega to carry AMD successfully into beyond 2017.

Due to AMD taking a bite of prosperous advantage to monetize its intellectual property (specifically Tianjin Haiguang Advanced Technology Investment Company) along with the aforementioned sharper competitive advantage, Sur finds that investors are feeling more and more confident about AMD stock. Yet, Sur explains his reluctance to be bullish, elaborating, “Although we are constructive on AMD’s mid- to long-term opportunities, and are raising our estimates, we see limited upside in the stock from current levels. Furthermore, with limited leverage in the model, and modest profitability through our modeling period, we remain Neutral AMD.”

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, Harlan Sur has a ranking of #1,506 out of 4,077 analysts, with a present-day success rate of 53% coupled with 2.3% in average returns.

TipRanks analytics indicates AMD to be a Hold. Of the 15 analysts polled in the past 3 months about the stock, 4 rate Advanced Micro Devices, Inc. as a Buy, 5 maintain a Hold, and 6 issue a Sell. The average price target is $4.91 with a close to 16% downside from where shares last closed.


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