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This Top Analyst Isn’t Upbeat About Advanced Micro Devices (AMD) Stock; Here’s Why


Is Advanced Micro Devices (AMD) stock back on the up and up?

That’s what investors are wondering as the chip-maker’s stock has risen 30% since the beginning of the year. Investors dumped the stock in droves around the end of September last year, following disappointing earnings reports and the climate surrounding chips in general. Though the stock was able to rise nearly 60% in 2018, it dropped more than 40% between September and end of the year.

However, even as many investors are getting back on the horse, UBS analyst Timothy Arcuri remains on the sides, reiterating his Neutral rating and $24 price target.

As he remains neutral, Arcuri concedes that AMD “continues to execute well having achieved its YE18 server CPU share goals, navigated through ongoing GPU channel inventory adjustment with much less impact than NVDA, and guiding March Q EPS better than feared.” But even with the positives, the analyst says that “results here were aided by some large (and lumpy) data center GPU shipments,” as “March Q EPS guidance would have been very close to our breakeven estimate (Street $0.08) were it not for a 1x royalty gain, and the full-yr 2019 guidance implies an extremely 2H-loaded year.”

In Arcuri’s eyes, the stock is a bit of a mixed bag. On the positives, the analyst says, “1) Strong quarter for C&G (+9% Y/Y, +5% Q/Q) on Ryzen CPU and DC GPU growth while EPYC server CPU units increased more than 2x Q/Q; 2) GM up to 41% (+740bps Y/Y, +110bps Q/Q) driven by Ryzen/EPYC sales.”

But on the negatives, Arcuri says, “1) Light March Q rev guide for $1.25B (-24% Y/Y, -12% QQ) significantly below Street expectations (but in-line w/ our previously lowered est); 2) Q1 EPS would have been very close to our breakeven (Street at $0.08) were it not for a 1x royalty gain.”

Overall, Arcuri is at “about the same place [he has] been; the share gain runway here is significant – especially in hyperscale data centers that use high-density/cost optimized compute for memory bound and I/O bound workloads.” But also says that “share gains should be harder to come by though for compute intensive workloads & for HPC (a segment that INTC owns).”

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Timothy Arcuri has a yearly average return of 24.2% and a 67% success rate. Arcuri is ranked #40 out of 5,142 analysts.

Overall, Wall Street is moderately bullish on AMD, with TipRanks analysis of 21 analyst ratings showing a Moderate Buy rating. Of the 24 analysts, 12 rate Buy and 9 rate Hold. There is an average price target of $26.32, representing an 8% rise from current levels. (To see AMD’s price target on TipRanks, click here)

 

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