Investors don’t know what to think about Advanced Micro Devices (AMD). While the chip giant is up more than 70% for the year, it is down 42% from its 52-week high. Then, just last week, the company seesawed again; after news of a 90-day trade war ceasefire between the US and China, the stock shot up 10%, before retreating nearly 20% by the end of the week.
So where’s the stock going next? Northland analyst Gus Richard is still bullish on the company, reiterating an Outperform rating and price target of $26, which implies a potential upside of nearly 30% from current levels. (To watch Richard’s track record, click here)
Richard updated his model to “reflect more normal seasonality” in first-half 2019. The analyst had forecasted increased demand as a result of the tariffs but believes “US customers may slow orders” because of the truce. Richard still expects AMD to “reach double digit unit share of servers” by mid-2020.
The analyst also cites a few factors that investors should be wary of. For example, Richard notes that AMD relies on third party companies to manufacture its products and says, “if these (companies) are unable to deliver on time, AMD will then not be able to supply their products in a timely manner.”
Richard also notes that the company is in the process of refocusing their business model to beyond the PC market. The company is targeting “different markets that have higher growth rates”. But he cautions, “If (AMD is) unable to accurately forecast future consumer needs they will fall behind the industry and become obsolete.”
“Due to the Crypto bubble in 1H:18, 2H:18 will be down from the first half of the year. In addition, y/y comps will also be negative in 1H:19. However, we expect the graphics inventory correction to be complete by Q2:19, setting a stronger 2H:19 along with server demand,” the analyst wrote.
Northland’s Richard has proven himself as a trustworthy source of insights for AMD. The analyst has an 85% success rate and an average return of 165% on the stock. His $26 price target is nearly in-line with the $26.14 average price target of 24 analysts tracked on TipRanks. Of these 24 analysts, 12 recommend Buy, 10 recommend Hold and 2 recommend Sell. (See AMD’s price targets and analyst ratings on TipRanks)