Advanced Micro Devices (AMD) is on the up-and-up.
After a rags-to-riches-back-to-rags journey in 2018 — where the stock was among the best and worst performing on the market (the former in the first half of the year, the latter in the second) — the stock has rebounded more than 20% so far in 2019. The company posted strong Q4 earnings and continues to gobble up more market share in the GPU and server markets, which has contributed to its 2019 rise.
Based on this and other factors, Elazar Advisors analyst Chaim Siegel has upgraded his rating on AMD stock to Strong Buy, with a $39 price target, which implies about 70% upside for the stock.
Siegel points out that his “model does the math that you have a $300mm drag in Q4 and Q1 from crypto and one-timers. Then maybe $250mm drag in Q2 and no drag in Q3 and Q4 which allows the ramp of Rome, Ryzen, and GPUs to shine through.” Siegel says he uses his “2-year and add back the loss of the one-timer hit to get to my numbers.”
Siegel concedes his numbers may be “high,” but thinks “the Street does not believe the company’s guide so the company just doing their guide is good enough for the stock. If the company does my type of numbers based on simple math I think there’s huge upside to the stock.”
The short-term outlook for AMD is similar to that of other semiconductor stocks. Investors aren’t too sure what to make of the macro market — the vital US-China relationship plagued stocks in 2018, though is showing signs of improving which would be a boon to industry stocks. Furthermore, oversupply still challenges the industry as the slowdown in China has contributed to lower demand, which, in turn, has contributed to lower average selling prices.
But working in AMD’s favor is their soon-to-be-released 7nm processing chip, which will help set them apart from Intel, while also their partnership with Amazon Web Services, which will help server sales. While Intel continues to see production challenges with their new 10nm processor, AMD will be able to jump a generation ahead by releasing their 7nm chip.
Overall, investors are becoming more bullish on the industry in general but are still a bit wary over AMD, even as the stock continues to rise in 2019. TipRanks analysis of 20 analyst ratings on AMD shows a consensus Moderate Buy, with an even split of 10 analysts Buying and 10 Holding. There is an average price target of $26.65 among the analysts, representing a 17% upside to the stock. (See AMD’s price targets and analyst ratings on TipRanks)