If top analyst Matt Ramsay at Canaccord were to play favorites on semiconductor stocks, Advanced Micro Devices, Inc. (NASDAQ:AMD) takes the cake, with Intel Corporation (NASDAQ:INTC) left in AMD’s dust. Though both stocks circle respective risks as well as offer compelling rewards, for Ramsay, AMD’s risk/reward is the better deal at the end of the day, leaving him less than confident on Intel- even though the shares are not expensive.
Matt Ramsay has a very good TipRanks score with a 68% success rate and a high ranking of #57 out of 4,698 analysts. Ramsay realizes 25.6% in his annual returns. When suggesting AMD, Ramsay yields 58.4% in average profits on the stock. When recommending INTC, Ramsay garners 16.7%.
Let’s take a closer look at what one of Wall Street’s best performing analysts finds so impressive about AMD and what has him stopped in his tracks still on Intel:
AMD Vega Underwhelms a Bit, But Cryptocurrency Demand to Snag Upside
AMD is looking enticing ahead of its third quarter print due next Tuesday in the eyes of Ramsay, who has been a bull on this chip giant for well over a year now. Especially as momentum’s flames keep fanning for Ryzen desktop and the company’s EYPC server product lines alike, the analyst continues to expect long-term gains for the semiconductor player.
Therefore, in a confident earnings preview, the analyst reiterates a Buy rating on AMD stock with a price target of $20, which represents a just under 44% increase from current levels.
For bears who doubt AMD’s Vega GPUs, Ramsay says not to worry: “strong cryptocurrency GPU demand should overcome modestly disappointing power/performance metrics from new Vega GPUs against tight product supply, with reasonable expectations set for the Q4/17 Ryzen Mobile launch and a strong overall roadmap moving to 7nm across the portfolio during 2018.”
Ramsay continues, “While we raise our Q3/Q4 estimates slightly above consensus due to cryptocurrency GPU demand and remain well above consensus for 2H/18 and for long-term AMD revenue and earnings estimates, we anticipate a more gradual EPYC server revenue ramp over the first few quarters despite positive industry feedback and now deeper engagements with both Google and Facebook and remind investors that further near-term share count inflation from convertible debt remains likely. Finally, our industry checks indicate 7nm chip development timelines remain intact for what should prove even stronger products across AMD’s roadmap versus Intel during 2H/18 and 2019.”
The bigger picture may include some level of risk factor when the analyst takes under account roadmap execution as well as relentless competition in the chip making sphere, but overall, risk/reward points to upside for this semiconductor contender.
Wall Street is not as surefire positive as Ramsay, but is largely upbeat, considering TipRanks indicates AMD as a Buy. Out of 18 analysts polled by TipRanks in the last 3 months, 8 are bullish on AMD stock, 7 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 4%, the stock’s consensus target price stands at $14.44.
Intel Investors Still Need to See Investments Can Show Stellar Returns
Ramsay has surveyed Intel from the sidelines ever since he stepped away from the bulls back in February, and continues to have less conviction than consensus on Intel’s prospects, anticipating a “modest” secular dip and sub-10% year. Additionally, though the chip giant saw a sturdy second and third quarter performance in the second and third quarter, the analyst worries this could leave the company at risk for a prospectively “weaker” fourth quarter.
Though for the short-term, the analyst opines, “the Core X-series of desktop processors, first CoffeeLake notebook chips and the Purley/Skylake server platform are impressive and incrementally expand the breadth of Intel’s portfolio at the high end of its served markets,” for now, he maintains a Hold rating on INTC stock with a $38 price target, which implies a 5% downside from where the stock is currently trading.
For the year, the analyst forecasts PC sales to wind down around 0.3%, increasing the downturn to roughly 3.2% by next year when the total addressable market (TAM) seems predominantly “flat” when trying to tackle fresh rivalry heading the company’s way from Intel. Moreover, the analyst projects 6.8% in Data Center growth for this year and 7.9% by next year, which are both under the INTC team’s “low-double-digit long-term target.”
It seems to be a mixed bag for this semiconductor stock: “Driven by the launch of certain CoffeeLake notebook products and the Purley server platform, we anticipate stronger 2H/17 results for Intel overall and improved DCG operating margins versus 1H/17. However, while we concede Intel shares generate a strong yield and remain inexpensive, we believe the recent stock appreciation is premature and shares could retrench and remain range bound until investors see proof investments in 10/7nm, FPGAs, auto, IoT and memory will generate strong returns within a reasonable time horizon and margin structure,” surmises Ramsay.
Wall Street is also playing it safe on Intel, as TipRanks demonstrates INTC as a Buy. Based on 22 analysts polled by TipRanks in the last 3 months, 10 rate a Buy on Intel stock, 9 maintain a Hold, while 3 issue a Sell on the stock. The 12-month average price target stands at $39.78.