What a wild ride the last 12 months have been for shareholders in Advanced Micro Devices (AMD). After a dramatic rise in late September of 2018, the stock fell sharply before steadily rising throughout 2019. This brings us to a critical point: Will 2Q earnings propel the stock further in 2019, or are AMD’s best days behind it?
Wedbush analyst Matthew Bryson believes the stock has more runway to the upside. Ahead of the earnings release tonight, Bryson reiterates an Outperform rating on AMD stock, while slightly raising the price target to $39 (from $35), which implies nearly 17% upside from current levels. (To watch Bryson’s track record, click here)
AMD recently released new Ryzen desktop processor lineup, and Bryson notes that reviews of this new product have been “nearly ubiquitously positive with AMD surpassing INTC in every metric except gaming.” Even in gaming, Bryson said that reviews showed that AMD was quickly narrowing the gap with Intel. AMD’s new parts also offer some superior value to Intel’s counterparts, as the bundles are priced the same and AMD includes a cooler in the price, compared to Intel which sells its coolers separately.
AMD’s Taiwanese supply chain has signaled that both AMD and Nvidia are ramping up GPU production. This is a positive sign, as AMD has been drawing down its GPU inventory. With AMD releasing new GPUs, the company should be able to restock its inventory with its new GPU lineup, making the company’s GPUs more attractive to customers.
Furthermore, Bryson’s bullish view on AMD is largely supported by his belief that AMD will increase its future market share in the server CPU market. AMD’s new chip called ‘Rome’ has been tested by reviewers and it is showing better power and performance than present-day Intel designs. The ‘Rome’ chip has double the cores as the previous iteration but only uses 20 more watts of power, which is a key factor for the server CPU market.
A final factor that supports Bryson’s bullish take on AMD is the expectation of gaming console redesigns from Sony and Microsoft in 2020, which should help lift demand. Bryson will also be looking out for a new IP agreement with Samsung.
The Street largely seems to echo Bryson’s positive sentiment on the chip giant, considering TipRanks analytics showcase AMD as a Moderate Buy. Out of 21 analysts polled by TipRanks in the last 3 months, 13 are bullish on AMD stock, while 8 remain sidelined. However, the 12-month average price target stands at $34.55, which aligns evenly with where the stock is currently trading. (See AMD’s price targets and analyst ratings on TipRanks)