Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

Thursday’s Wall Street Insights: Advanced Micro Devices, Inc. (AMD), Tesla Inc (TSLA) and QUALCOMM, Inc. (QCOM)

Advanced Micro Devices, Inc. (NASDAQ:AMD) received an unexpected and brutal stock downgrade by Barclays. This is the first downgrade AMD gets in the past seven months. Barclays’ analyst Blayne Curtis says AMD could crash by 35% – losing some of the 150% gain the stock is racked up over the last 12 months.

Curtis has two main concerns about AMD stock:

  1. Curtis says he has been examining the server chip offerings from AMD and its larger rival Intel following the release of AMD’s much-anticipated server-chip Epyc at the end of June.
  2. Curtis notes that Intel’s server chips have faster max clock speeds and quicker computer memory connections. He concludes that the “Epyc will not gain enough traction to support [the] current valuation” especially as crucial channel checks reveal “little to no material traction” with ODMs (original design manufacturers of computers).

However, AMD subsequently issued a statement to CNBC dismissing Curtis’ concerns. The company said they are “confident” in the Epyc server processor both in terms of its performance and consumer value. AMD adds that at the recent launch for the Epyc it demonstrated strong support and enthusiasm from both customers and the server ecosystem- who are looking forward to a new competitor to enter the datacenter market.

Curtis downgraded AMD from Equalweight to Underweight with a price target of $9.00. And bad news for AMD- Blayne Curtis has a relatively solid track record according to TipRanks. He is ranked #256 out of 4,606 tracked analysts, due to his 67% success rate and 14.7% average return per recommendation.

Overall, analysts are sidelined on the outlook for AMD. The stock has a ‘hold’ consensus rating due to the 9 buy, 10 hold and 4 sell ratings received by AMD in the last three months. Meanwhile the average analyst price target for AMD of $12.53 now stands at a -7.5% downside from the current share price.

Tesla Inc (NASDAQ:TSLA) today became part of Citigroup’s stock coverage. Citigroup’s Itay Michaeli initiated the stock with a hold rating and a price target of $357, which suggests sweet upside potential for Tesla over the next 12 months of close to 10%. Tesla is currently trading at $325.

Michaeli gave this opening analysis of the controversial stock: he says he is optimistic that Tesla will be a “Car of the Future leader” and calls the stock’s “upside case to still be significant”. However, Michaeli concludes that he would rather wait for a better entry point before he would rate the stock a ‘buy’ which would make the risk/reward weigh up more balanced. This entry point could be achieved through a stronger balance sheet or a successful ramp up to Model 3 sedan production without cannibalization of Tesla’s current Model S vehicle offering.

The fundamental outlook on Tesla is bullish, says Michaeli but concedes that the bear story also has merit. He lists “initial product success, brand appeal, speed of innovation and tech/software leadership” as positive catalysts for Tesla and says he will be keeping an eye on margins, Model 3 conversions and leadership in self-driving over the next 12 months.

Michaeli has a four-star rating on TipRanks where he is ranked at #936 out of 4,606 analysts. We can see that he has a 62% success rate and average return of 8.4% per recommendation.

Like AMD, Tesla has a hold rating from the Street. In the last three months, the stock has received 6 buy, 18 hold and 4 sell ratings. The average analyst price target of $302.07 also translates into downside of -7% from the current share price.

Qualcomm Inc (NASDAQ:QCOM) has just reported its earnings results for the fiscal third quarter. Qualcomm is currently involved in a long-running patent dispute with tech giant Apple- and this has somewhat overshadowed the stock’s earnings results.

QCOM reported mixed results for the fiscal quarter with EPS of $0.83 and revenue of $5.3 billion. BMO Capital Markets’ Tim Long says that while revenue upside was driven by chips and EPS by tax benefits, the “long term picture is less positive.” The company now expects September-quarter sales of $5.8 billion at the midpoint.

On July 20, Long reiterated his hold rating on the stock and a $55 price target which is just 0.84% above the current share price. Long has two main concerns – hence the hold rating. First is the patent dispute with Apple, which Long says has led to the “underpayment from another major licensee” (which he assumes to be Samsung) and a number of regulatory investigations. Long is now excluding both Samsung and Apple from his models. He also says that he does not expect any resolution of the conflict within the next year.

Overall, Qualcomm has a Moderate Buy analyst consensus rating with 7 buy and 11 hold ratings in the last three months. The stock has an average analyst price target of $61.90 which- with shares dropping- is now a 14% upside from the current share price.


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