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Why This Bear Boosted Price Target on Advanced Micro Devices (AMD) Stock


There’s good news for Advanced Micro Devices (NASDAQ:AMD) investors who’ve had the guts to stick with the stock and resist the temptation to take profits. After an underwhelming 2017, the chip giant has turned in one of the hottest performances thus far in 2018. Year to date, AMD stock is up nearly 95%, with most of that gain coming in the past three months.

Unfortunately, Barclays analyst Blayne Curtis got caught on the wrong side of the trade in AMD, after downgrading the stock to Underweight (i.e., Sell) back in July, 2017.

However, Curtis is sticking with his bearish rating, while raising the price target to $15.00 (from $9.00), which reflects a potential downside of 25% from today’s closing price. (To watch Curtis’ track record, click here)

Curtis commented, “There are no material changes to our estimates but we are now using a higher multiple to reflect a wider range of outcomes for Epyc server traction ($1 -1.5B vs. prior $500M). We do want to be clear that we still have not seen any evidence to support these more bullish levels, but clearly the market is much more optimistic on the growth prospects as reflected in the stock’s appreciation. AMD has effectively reduced the discussion of future server performance to process technology but the lack of response from Intel following the multiple 10nm push-outs leaves little reason for investors to believe differently (and for us to defend).”

“While we agree the discussion of AMD is currently all about servers, we would still highlight that GPUs (which have doubled Y/Y) face upcoming headwinds with the launch of NVDA Turing while AMD shifts in focus toward the 7nm data center product, leaving no gaming response. We also would keep an eye on the CPU side where Ryzen desktop gained no appreciable traction post launch (ASPs actually down y/y), suggesting Ryzen mobile may see a similar pullback after channel fill is complete. Net net, we haven’t thrown in the towel on the UW but do want to reflect a greater range of outcomes should we be wrong,” the analyst continued.

Overall, Wall Street sizes up AMD as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the chip giant. In the last 3 months, AMD has received 10 bullish ratings versus 8 analysts hedging their bets, and two bears. Yet, the consensus price target hints at caution baked into expectations here. The 12-month average price target of $19.18 reflects a slight downside potential of 2%.