In the great tech expanse, how does top analyst Matt Ramsay at Canaccord measure three of the biggest semi-conductor companies against the other? The analyst is lobbing his bullish vote on Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA), going as far as to lift the price target on the latter stock. Yet, even with the Core X-series of desktop processors and Purley/Skylake server platform added to the Intel Corporation (NASDAQ:INTC) portfolio, Ramsay highlights a precarious future facing this giant amid an upsurge of competition. Let’s explore (To watch Ramsay’s track record, click here):
Advanced Micro Device’s Most Important Comeback Quarter
All investor attention is peeled to tomorrow evening after the bell when Advanced Micro Devices delivers its second-quarter print, and what Ramsay deems the chip giant’s first crucial quarterly performance in its continued play as comeback kid of the semi-conductor world. Specifically, Ramsay’s eyes are on AMD third quarter outlook, which he believes will not shake his long-term confidence on the company’s prospects, especially when looking to the 7nm next-gen product pathway that glints with promise.
Therefore, ahead of the print that should further back “a foundation for share gains across the roadmap,” the analyst reiterates a Buy rating on shares of AMD with a $20 price target, which represents a 43% increase from where the stock is currently trading.
Looking to the chip giant’s EPYC server launch up against rival Intel’s offensive Purley/Skylake platform launch, the analyst cannot help feeling “quite impressed at the competitive position of EPYC for memory/IO intensive workloads (and even some CPU workloads) versus Intel’s strong incumbent offering.”
At the core, “While some investors remain skeptical on AMD’s turnaround as evidenced by mixed feedback in our recently hosted bull/bear lunch (summarized in a separate report today), we believe sustained n-node execution across the PC, GPU and server roadmaps can deliver the much higher gross margin well into the 40%’s and potentially material upside to the $0.75 EPS target for 2020 outlined in the updated long-term financial model at AMD’s recent analyst day. To that end, we provide a revenue, gross margin and EPS sensitivity analysis around our modeling assumptions in Figure 1 of this report. While overall we recognize sustained roadmap execution and competitive risks remain, we believe risk/ reward is still tilted toward the upside and our long-term bullish target of $1.25+ in EPS remains exceedable by 2020,” contends Ramsay.
TipRanks analytics showcase AMD as a Hold. Out of 23 analysts polled by TipRanks in the last 3 months, 9 are bullish on Advanced Micro Devices stock, 10 remain sidelined. and 4 are bearish on the stock. With a loss potential of nearly 10%, the stock’s consensus target price stands at $12.53.
Nvidia Continues to Rise as Platform Computing Leader
Nvidia is set to keep outperforming consensus expectations, says Ramsay, who is getting more bullish on this chip giant, expecting datacenter sales can hit past $5 billion in the next three years. With worldwide gaming trends on the rise and with the giant’s automotive collaborations down the line going strong, Ramsay is cheering quite the robust evolution at hand for the Nvidia team.
As such, the analyst reiterates a Buy rating on NVDA while boosting the price target from $155 to $180, which represents a 7% increase from where the shares last closed.
Making a strong case for rooting for this chip giant, the analyst asserts that even with the threat of fierce competition abounding, the picture looks enticing for Nvidia. “Our overall bullish thesis on GPU computing continues to accelerate (particularly datacenter) and we believe NVIDIA’s emergence as a platform computing company (of which gaming is just one important piece) is now cemented. Further, while conversation about increased competition from the Xeon Phi roadmap at Intel, new Vega/Navi GPUs from AMD and particularly in-house ASICs for datacenter acceleration continues to increase, we remain very impressed how quickly NVIDIA has segmented the product roadmap to provide more application-specific silicon to both the quickly evolving datacenter and automotive markets. As such, while we anticipate competition will increase in these exciting new markets and sustain from AMD in gaming, we believe NVIDIA’s thought leadership and both software R&D and n-node silicon scale will continue to deliver well above consensus growth,” asserts Ramsay.
TipRanks analytics demonstrate NVDA as a Buy. Based on 25 analysts polled by TipRanks in the last 3 months, 15 rate a Buy on Nvidia stock, 9 maintain a Hold, while 1 issues a Sell on the stock. The 12-month average price target stands at $152.09, marking a nearly 10% downside from where the stock is currently trading.
Intel Investors Still Need Proof that Strong Returns Are Underway
Intel’s latest desktop processor and server move in the market have jazzed its short-term with exciting potential, and Ramsay is certainly impressed. Unfortunately, the Purley platform launch did “little” to sway apprehensive investors over to the bulls nor allay the analyst’s misgivings down the line as second-quarter earnings near this Thursday evening.
Therefore, ahead of the print, the analyst remains less confident than consensus, reiterating a Hold rating on shares of INTC while trimming the price target from $38 to $37, which represents a close to 7% increase from where the stock is currently trading.
Overall, “[…] we continue to believe Intel’s PC revenue will remain in a modest secular decline and Intel’s server growth rates will remain sub-10% annually. In particular, we model PC sales down ~3.4% in 2017 and down ~3.1% in 2018 in a largely flat TAM against new AMD competition and model DCG growth of 7.6% and 8.5% in 2017 and 2018, respectively, or below Intel’s low double digit long-term growth target. Combined with the launch of certain 10nm notebook products and the new Skylake/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 shares could remain range bound as overall gross margins stagnate and until investors see proof that new investments in 10/7nm, FPGAs, auto, IoT and memory are capable of generating strong returns within a reasonable time horizon and margin structure,” Ramsay surmises.
TipRanks analytics reveal INTC as a Buy. Out of 25 analysts polled by TipRanks in the last 3 months, 12 are bullish on Intel stock, 9 remain sidelined, and 4 are bearish on the stock. With a return potential of 12%, the stock’s consensus target price stands at $38.90.