Why This Bear Significantly Raised His Price Target on Advanced Micro Devices (AMD) Stock


Advanced Micro Devices (AMD) stock has had a difficult few weeks correcting off of a long rally. However, even now, the stock is still up 148% year-to-date. The main reason for the renaissance of AMD is that many in the industry think AMD’s EPYC server chips are faster and more efficient than Intel’s competing Xeon product.

Indeed, Barclays analyst Blayne Curtis has admittedly been surprised by how quick investors were to give AMD credit for server share gains.

“There’s no denying AMD will have large performance gains in the EPYC 2 generation (likely double performance on 2x cores) and it is well known at this point that Intel’s roadmap is facing challenges with a 10nm server product ready mid-2020, at best. What’s not talked about enough is what action Intel will take in the absence of competitive parts to retain share and that is the crux of why we are downgrading INTC and still not upgrading AMD here,” Curtis noted.

Curtis reiterated an Underweight rating on AMD stock, while boosting the price target to $25.00 (from $15.00), which represents a slight downside potential from current levels. (To watch Curtis’ track record, click here)

“We don’t expect near-term estimates to matter much as investors look forward, but we do see some risk in both servers and GPUs next year. AMD clearly saw some traction with EPYC 1 with most modeling ~$100M in the December quarter. What is unclear to us is why servers will continue to grow sequentially throughout 2019 as EPYC 1 wanes and EPYC 2 likely doesn’t ramp until late 2019. We believe customers won’t have production EPYC 2 silicon until March 2019 meaning that, even in the most compressed qualification schedule, we wouldn’t expect to see any volume revenue until Sept 2019,” Curtis added.

Net net, Wall Street is torn when it comes to whether to sing the chip giant’s praises or assess with an apprehensive gaze, as according to TipRanks, out of 23 analysts polled in the last 3 months, 10 are bullish on AMD stock while 11 remain sidelined and only 2 are bearish. With a potential upside of 13%, the stock’s consensus target price stands at $28.62. (See AMD’s price targets and analyst ratings on TipRanks)

 

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