Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Last Minute Thought: Buy or Sell Advanced Micro Devices (AMD) Stock Before Fiscal Q1’19 Earnings?


Advanced Micro Devices (AMD) is slated to announce first-quarter earnings in just a few minutes, and investors are hoping the chip giant can justify this year’s torrid gains (up 48%).

AMD, like its rivals, was under tremendous pressure in 2018 following a collapse of the chips market. But things are looking better across the board, with prices expected to begin to rise in 2019, and with AMD’s to-be-released 7nm chip.

Ahead of the earnings release, RBC analyst Mitch Steves remains a buyer of AMD stock, reiterating an Outperform rating and $34 price target. (To watch Steves’ track record, click here)

Steves believes Intel’s recent earnings update is providing positive news for AMD. Intel blamed “competitive dynamics” for its second-half “data center change in tune,” which Steves attributes to AMD share gains in the market. Further, the analyst says that AMD is “likely [to gain] share at the high-end” of the PC market, as Intel is shipping its chips to the low-end.

While Intel provided some positive news for AMD investors, Steves believes the former’s weaker-than-expected data-center results means AMD investors should expect a “slight miss” in that segment. But nonetheless, Steves remains positive due to his belief in PC unit upside while the data center trends are in-line with the market.

Steves looks at gaming as a segment with great potential for AMD. He says, “gaming will be a steadier secular growth business for AMD…as games continue to become more complex and game sizes increase to accommodate improved graphics,” which should increase the demand for GPUs. Gaming comes with “less risk to the downside (than servers)…considering that there are only two GPU players (Nvidia and AMD).” The analyst also says gaming should helps support average selling prices and margins. While Steves believes Nvidia will remain the market share leader, a “rising tide…should lift both companies.”

All in all, after AMD stock crashed in 2018, the stock is off to a strong start to 2019, up nearly 50% for the year. The chips market seems to be coming back, while the company is set to release its 7nm chip this year.

The word on the Street rings largely bullish on the chip giant, with TipRanks analytics demonstrating AMD as a Buy. Out of 17 analysts polled in the last 3 months, 11 are bullish on AMD stock, 5 remain sidelined, and only 1 is bearish on the stock. With a return potential of nearly 7%, the stock’s consensus target price stands at $29.42.

 

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