Advanced Micro Devices (AMD) has made a big push into the CPU server market with its EPYC chips. Estimates for how much server market share AMD has gained through EPYC most normally come in around 5%, or in the mid-single-digit range. With the launch of new 7nm EPYC Rome chips, AMD projects to keep stealing share from Intel in 2019, and expects market share to rise from 5% in 2018, to 10% in 2019.
However, Baird analyst Tristan Gerra believes the 10% market share target faces challenges and, as such, trims his price target to $20 (from $23), while reiterating a Neutral rating on AMD shares. (To watch Gerra’s track record, click here)
Gerra opined, “While EPYC’s performance exceeded that of Intel in comparable implementations last year, testing of Xeon Scalable nextgen platform so far suggests performance ahead of EPYC, per our field research. Additionally, we hear Intel is likely to take a more aggressive stance on pricing this year, after a significant price hike last year.”
The analyst continued, “It takes three quarters for server customers to evaluate a new architecture before ramping incremental volume. Given many of these customers started to use EPYC in 4Q18, market share gains at existing customers will likely be gradual starting in 2H19, leading us to believe a doubling in EPYC volumes in 4Q19 versus 4Q18 may be difficult to achieve.” Furthermore, “We have received feedback some EPYC-based platforms were less stable versus Xeon Scalable. While not likely to entirely inhibit AMD’s share gains as customers benefit from dual-sourcing, this could represent another limiting factor in AMD’s share gain targets.”
Market data on TipRanks reveals consensus pegs AMD as a ‘Moderate Buy’ stock. In the last three months, the chip giant has scored 12 bullish recommendations, with 7 analysts hedging their bets on the sidelines and 2 bearish analysts. Consensus expectations suggest a positive overall story. The 12-month average price target stands at $25.70, marking close to 24% in upside potential for AMD stock. (See AMD’s price targets and analyst ratings on TipRanks)