AMD stock is trading at a lower price. Why the decline is an opportunity.
the stock looks more attractive after upbeat earnings and a lower share price, making it a buy, according to Daiwa Capital Markets.
Daiwa analyst Louis Miscioscia updated Advanced Micro Devices (ticker:
) to a 1-Buy, the company’s highest rating, versus a 2-Outperform. The analyst also raised his price target to $150 from $140 previously.
“AMD is delivering on its multi-year growth strategy,” Miscioscia wrote in a research note Wednesday. “For 4Q21, results were above the high end of the guidance and the company delivered a very strong guidance for 1Q22 and full year, even after strong increases each quarter throughout the year.”
AMD had a strong fourth quarter, generating $4.8 billion in revenue with adjusted earnings of 92 cents per share, well above Wall Street expectations for $4.5 billion in revenue and earnings of 76 cents per share. The company forecasts first-quarter revenue of $5 billion, up 45% from a year ago, with a gross margin for the quarter of 50.5%.
Demand for AMD’s semiconductors remains strong across the board, including PCs, data centers, graphics processing units and gaming consoles, which could continue to drive growth, Miscioscia said. . AMD currently has eight of the top 10 cloud customers, including Alphabet
(MSFT), he said.
“Part of AMD’s continued growth is due to them seeing firm orders and good visibility of cloud demand for in-house applications and more instances, and as such they have subscribed to increased foundry capacity,” he wrote. AMD does not manufacture the chips it designs, instead relying on so-called foundries such as Taiwan Semiconductor Manufacturing.
The stock rose 0.7% to $129.16 on Wednesday, but has lost 10.2% so far this year, battered by rising Treasury yields that have hit tech stocks. This price drop is a buying opportunity, Miscioscia said.
Other analysts took a wait-and-see approach, with 16 of 41 analysts covering the stock surveyed by FactSet rating it Hold. Only one analyst rated it as a sell, while 24 rated it as a buy.
Key risks to Daiwa’s rise include macroeconomic shocks that could halt IT spending, disruptions to data center architecture or faster-than-expected declines in the PC market, he said.
Write to Sabrina Escobar at [email protected]