Advanced Micro Devices, Inc. (AMD) Partnership with Its Rival Has This Top Analyst Betting on Enticing Notebook Market Opportunity

Matt Ramsay spotlights AMD's graphics roadmap and sees more upside ahead thanks to new Intel deal.

In a game of risk vs. reward, Advanced Micro Devices, Inc. (NASDAQ:AMD) has odds on upside, says top analyst Matt Ramsay at Canaccord, especially on back of a brand new GPU deal with rival Intel.

In terms of the collaboration revealed on Monday, Intel is set to use AMD’s Vega GPU in its multi-chip package for both the thin and light high-end notebook market, which Ramsay predicts could yield “solid” gains for AMD. Not only does this bode well for the chip giant’s graphics roadmap, particularly following its new VEGA GPUs’ performance that left Ramsay “somewhat disappointed,” but the notebook market share glints as “a sizeable opportunity for AMD.” For Ramsay, the GPU endorsement is a savvy move, as it is “further solidifying the ability for AMD to monetize its IP consistent with our long-term thesis.”

Oh “how times have changed!” cheers the analyst, maintaining a Buy rating on AMD stock with a price target of $20, which implies a just under 66% upside from where the shares last closed.

“Importantly, we believe this partnership represents a strong endorsement of AMD’s graphics roadmap from Intel and gaming- and productivity-focused notebook OEMs. As such, we reiterate our positive thesis on AMD which is further underwritten by management’s ability to monetize the portfolio as strong near-term crypto-currency GPU demand, stronger Ryzen sales and first Ryzen Mobile launches should alleviate risks in Q4/17, while H2/18 sets up as an inflection point with our industry checks indicating 7nm chip development timelines remain intact for what should prove even stronger CPU products across AMD’s roadmap versus Intel during 2H/18 and 2019,” surmises Ramsay, who affirms that not only can the giant meet his long-term bullish expectations of $1.25+ in EPS, but this continues to be “exceedable” within three years’ time.

For this year, until AMD sets its launch timing, the analyst stands by his expectations looking for revenue of $5.24 billion for this year and $5.91 billion by next year, with EPS estimated to hit $0.12 this year and $0.31 by 2018. By 2020, the analyst’s base case calls for non-GAAP EPS of $0.87 with a bull case of $1.30, taking under account anticipated better revenue coupled with margin guide and sustained 7nm roadmap progress.

Matt Ramsay has a very good TipRanks score with a 69% success rate and a high ranking of #54 out of 4,707 analysts. Ramsay realizes 24.8% in his yearly returns. When recommending AMD, Ramsay garners 38.7% in average profits on the stock.

While Ramsay may be confident in his bullish case for the tech stock, Wall Street is not as overwhelmingly certain based on a middle-of-the-road analyst consensus rating. TipRanks analytics exhibit AMD as a Hold. Out of 21 analysts polled by TipRanks in the last 3 months, 8 are bullish on Advanced Micro Devices stock, 9 remain sidelined, and 4 are bearish on the stock. With a return potential of nearly 21%, the stock’s consensus target price stands at $14.52.

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