Are Advanced Micro Devices (NASDAQ:AMD) investors so hyper-focused on short-term results and the crypto craze that they are missing the forest through these trees? As far as the forest goes, one of Wall Street’s top analysts believes the key significance of the company’s road map development for Zen2-based products is far undervalued by investors. Top analyst Matt Ramsay at Cowen cheers that this chip giant is only “just getting started,” and its “move to 7nm” is set to “catalyze” even more gains ahead.
Therefore, the analyst initiates coverage on AMD with an Outperform rating on the stock and an $18 price target, which implies a 36% upside from current levels.
Ramsay notes, “As Moore’s Law slows, we believe AMD’s 7nm products from TSMC should gain additional share versus Intel’s 10nm silicon in 2019/20. Consistent product execution across the PC, GPU, and server road maps should deliver the much higher gross margin targets (40-44% versus 37% today) and material upside to the $0.75 EPS target for 2020 outlined by management.”
If there was a crystal ball painting what to expect for a world of PC, GPU, as well as server chipset road maps from the chip giant, the analyst anticipates the back half of 2018 will bring a wave of 7nm products from TSMC on back of a whole year of 7nm products spanning the portfolio next year. In shifting the roadmap to 7nm from 14nm in the next generation, the analyst believes the company’s products could boast a stronger performance coupled with performance per watt, trouncing 14nm offerings present-day.
“Further, we anticipate these new 7nm products will compete with the 10nm road map from Intel in the PC and server markets during 2019/20. Given our view, corroborated by proprietary industry checks, that 7nm foundry silicon is roughly equivalent to Intel’s 10nm node in terms of realized performance/ density/power, we believe another significant shift in the competitiveness of AMD’s products versus Intel’s will take place in 2019, leaving AMD at process node parity with Intel for the first time in well over a decade,” highlights Ramsay, who notes positive industry contact chatter circling 7nm chips.
“While recent blockchain and crypto upside certainly “has been nice,” the analyst concludes finding these gains “not that important long term.” Even if sales stemming from blockchain take a big dip in the sales mix in the back half of this year, bigger picture, Ramsay sees an offset ahead in gaming growth coupled with datacenter GPU sales. This company’s server road map is tracking for “success” this year and set to fire up next year with 7nm product, wagers the analyst, who believes the company could hit a stride of realizing more than $1 billion in high-margin server sales yearly in two years.
Matt Ramsay has a stellar TipRanks score with a 64% success rate and a high ranking of #98 out of 4,798 analysts. Ramsay earns 24.4% in his annual returns. When recommending AMD, Ramsay garners 38.9% in average profits on the stock.
TipRanks suggests sell-side analysts are encouraged on this chip giant. Consider that 10 out of 18 analysts polled in the last 3 months rate a Buy on AMD stock, 6 maintain a Hold, while 2 issue a Sell on the stock. With a return potential of 17%, the stock’s consensus target price stands at $15.24.