A Balanced Take on Advanced Micro Devices (AMD) Stock

Look at a list of the analysts that cover Advanced Micro Devices (NASDAQ:AMD). It includes 7 analysts with ‘buy’ ratings, 6 fence sitters with ‘neutral’ or ‘hold’ ratings, and 3 bears with ‘sell’ rating. Now you can add another ‘hold’ to the list.

Positioning himself between Bulls and Bears, Benchmark’s top analyst Mike Burton initiated coverage on the chip giant with a Hold rating.

The good news: “AMD should benefit from several important growth drivers as it leverages the success of its Ryzen CPU for desktops to the notebook market, and as it rebuilds its datacenter presence with its relatively new EPYC CPU server offering. Investors are particularly positive on EPYC following recent commentary from Intel stating that it expects AMD to take increasing share of the server CPU market. Also, we believe AMD is having some success on the graphics front, though this is more difficult to measure because of the impact that computing-intensive cryptocurrency (Ethereum) mining is having on the graphics market — management’s 3Q guidance calls for a decline in its graphics business.”

The bad news: “We expect further weakness in this market going forward. While Ryzen and EPYC tailwinds should more than offset potential crypto headwinds, we are concerned that Street estimates already reflect much of this growth, and that valuation appears inflated beyond the levels that we are comfortable with.”

Net net, “While we have a favorable view on AMD’s growth opportunities, we think these positives are already reflected in the shares given the stock’s >50% premium multiple compared to peers.”

As usual, we like to include the analyst’s trackrecord when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks.com, Burton is a top analyst who tends to get it right. The analyst has a yearly average return of 26.6% and a 74% success rate. Burton is ranked #66 out of 4824 analysts.

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