“We have certainly been wrong in our Underperform rating on AMD,” says BMO analyst Ambrish Srivastava.
AMD has traded higher Monday after BMO analysts increased their target price and rating for the CPU maker amid an improving earnings climate and market share increases against its rival.
In what he said was as a ‘mea culpa’ message on the company, BMO Capital analyst Ambrish Srivastava increased his AMD rating by one notch, to ‘outperform’ and increased his price target by $30, to $110 a share, citing a better valuation, better than predicted 2022 earnings and consistent shares gains against its top rival Intel.
“More crucially, with respect to the estimates, we also think there is more upward bias as we get through the year. Especially as the company starts to boost designs it has already won in the datacenter sector, from enterprise to HPC, including GPUs and CPUs,” said Srivastava. “While anticipated, we do not think these successes are correctly reflected in estimates currently.”
“With respect to share increases in the CPU market vs. Intel, we still think the rate of share increases will moderate next year compared to Intel, as Intel creates its Icelake product and releases Sapphire Rapids,” he said. “However, the company has now gotten to a place where it has captured the position of being an alternative to Intel for the ongoing future.”
AMD shares rose 0.5% in early trading on Monday, amid a 0.05% move downward by the Nasdaq, to trade at $110.75 each, a move that would prolong the stock’s ytd gain to about 20.7%.
Last month, AMD gave a 99% y/y surge in Q2 revenues that gave a stronger-than-expected 63 cents per share.
The graphics and computing segment, which covers PC CPU and GPU sales, saw revenue total $2.25 billion, up 65% y/y and 7% quarter-over-quarter pushed by higher GPU sales.
For the entire year of 2021, AMD now predicts a revenue increase of around 60%, up from previous guidance of around 50%, driven by stronger growth among all businesses.
Author: Blake Ambrose