In a boxing ring where Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA) are arms at the ready to outmatch the other for top of the chip-making leaderboard, how does Matt Ramsay at Canaccord, one of Wall Street’s best performing analysts believe the two giants measure up?
AMD just experienced quite the heavy crash at the start of the month after second quarter guidance left investors sore, questioning that this was supposed to be a period where AMD’s Ryzen carried the stock to the top. However, ahead of AMD’s analyst day, Ramsay remains unfazed by all the skepticism, believing by 2020, no one will be putting this promising chip giant in a corner. In turn, the analyst is so confident on competitor NVDA that he has lifted the price target on the semi-conductor player on back of an impressive first fiscal quarter for 2018 and an analyst day shining light on future dominion of the computing world.
Matt Ramsay has a very good TipRanks score with a 69% success rate and a high ranking of #40 out of 4,560 analysts. Ramsay realizes 22.5% in his annual returns. When recommending AMD, Ramsay garners 34.8% in average profits on the stock. When suggesting NVDA, Ramsay yields 131.6%.
Let’s dive in:
AMD: Risk/Reward Tilted Toward Upside
As analyst day in Silicon Value approaches Tuesday of this coming week for AMD, Ramsay believes this will be the chip giant team’s moment to shine and communicate with investors who might be concerned following May 1st earnings that caused the stock to take quite the crash. What Ramsay deems a “rocky” quarterly call certainly cannot be dismissed, but nonetheless, the analyst still sees Ryzen as “off to a strong start,” outclassing his preliminary forecasts. “Not much” has fundamentally changed for the analyst, and he still roots for AMD to bring upside by 2020.
As such, ahead of the company’s analyst day, the analyst reiterates a Buy rating on shares of AMD with a $17 price target, which represents a 54% increase from where the stock is currently trading.
Ramsay surmises that competition or not, this needle-mover is set to be on the up in face of all the apprehension against AMD. True, the analyst acknowledges, “While we believe this event and the upcoming launch of Naples server, Vega GPU and Radeon Instinct accelerator cards all in the next couple months should serve as positive catalysts, competition certainly is not standing idle and the recent stock volatility should serve as a reminder to management that investor confidence could be more difficult to permanently improve than the product roadmap.”
“That said; we remain confident in our positive thesis, despite the recent stock appreciation and then volatility, and continue to gain confidence in AMD’s new management team and product roadmaps. Modest growth assumptions across a $50B TAM from very low CPU/GPU share levels today drive our estimates materially above consensus, as much skepticism still remains (as recent events have reminded us). While we recognize road map execution and competitive risks remain, we believe risk/reward is still tilted toward the upside and that our long-term bullish target of $1.00+ in EPS […] remains attainable by 2020,” contends the analyst.
TipRanks analytics show AMD as a Buy. Out of 15 analysts polled by TipRanks in the last 3 months, 6 are bullish on AMD stock, 7 remain sidelined, and 2 are bearish on the stock. With a return potential of 14%, the stock’s consensus target price stands at $12.64.
NVIDIA’s Cementing Its Spot as Computing Leader
NVIDIA shares climbed 4% yesterday amid this week’s momentum for the chip giant’s stellar first quarter showing for fiscal 2018. After attending NVDA’s annual analyst day coupled with the GPU Tech Conference in San Jose that proved to Ramsay gaming, datacenter, and auto markets continue to grow, the analyst sees a compelling future for artificial intelligence (AI), Deep Learning, and GPU computing. How does NVIDIA factor into this tale of “datacenter acceleration?”
From Ramsay’s stance, with a gaming global market surpassing $100 billion that soars more and more, and strong moves from the chip giant coming in data center and tech automotive sector, the analyst believes NVDA is poised for “rapid growth.” Therefore, the analyst reiterates a Buy rating on NVDA while boosting the price target from $125 to $155, which represents a close to 23% increase from where the shares last closed.
As far as gaming is concerned, the analyst explains even in a fierce arena of rivalry, he’s putting his chips behind this chip giant. “While we acknowledge new high-rise competition and some tougher Y/Y growth compares later this FY, we continue to believe both units and ASPs will continue to grow in the long term and Pascal (and soon Volta) penetration remains low in the GeForce installed base,” explains the analyst.
For datacenter, the NVDA team estimates TAM will circle $30 billion by 2020 for accelerated computing. Though Ramsay expects this “will prove too aggressive by 2020,” even if the giant steals just one third of a TAM at a mere half that amount by then, “growth would prove remarkable, in our view.”
Additionally, “During the keynote, NVIDIA’s new Tesla V100 was announced featuring the new Volta architecture with NVIDIA’s new Tensor Core, offering incremental roadmap strength and diversification possibilities into NVIDIA’s datacenter portfolio. Management also presented compelling growth opportunities in each division and the expectation of further gross and operating margin expansion with strong capital returns. Our overall bullish thesis on GPU computing continues to accelerate (particularly data- center) and we believe NVIDIA’s emergence as a platform computing company (of which gaming is just one important piece) is now cemented,” Ramsay concludes, his bullish sentiment on NVDA continuing to grow along with the giant’s growth opportunities.
TipRanks analytics exhibit NVDA as a Buy. Based on 20 analysts polled by TipRanks in the last 3 months, 11 rate a Buy on NVDA stock, 6 maintain a Hold, while 3 issue a Sell. The 12-month average price target stands at $122.72, marking a nearly 3% downside from where the stock is currently trading.
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