Advanced Micro Devices (AMD) recent poor showing has sent investors fleeing from the stock. While the stock surged yesterday as the market recovered from a Christmas Eve plummet, shares are still down 40% since it reached a 52-week high in September. The market for GPUs has declines over the past few months, while pricing is also trending downwards which has put pressure on AMD and its stock.
However, RBC analyst Mitch Steves is still bullish on the AMD, maintaining his Outperform rating and $34 price target, which implies over 100% upside from current levels. (To watch Steves’ track record, click here)
Though Steves is bullish on AMD, he is adjusting his estimates after flagging “potential headwinds from crypto currency cards being resold in the secondary market.” He says, “this is likely a near-term issue and should abate next year” as exposure to the crypto market will go away. In the next 3-5 years, the analyst says this will be a nonstory.
Steves says he has “seen a notable price decrease in GPUs [in the secondary market]…[which] appears to be reducing the average selling price which we think could impact the 4th quarter.” As a result, he is adjusting “gaming number[s] down modestly and believe [AMD] will remain range bound until the air-pocket has passed.”
Steves estimates AMD will report revenue at the low end of guidance for the next quarter, while adjusting total FY19 revenue down about 1.6%. But even with the revenue adjustment, he says, “the long-term story for AMD remains unchanged.” The company is expected to release a 7-nanometer processing chip next year, while its partnership with Amazon Web Services brings a potential massive opportunity for revenue growth.
Overall, the word on the Street rings largely bullish on this chip giant, backing Steves’ confident move, with TipRanks analytics demonstrating AMD as a Buy. Out of 21 analysts polled in the last 3 months, 12 are bullish on the stock stock, 11 remain sidelined, while only 2 are bearish. With a return potential of nearly 56%, the stock’s consensus target price stands at $25.68. (See AMD’s price targets and analyst ratings on TipRanks).