AMD stock is trading at a lower price. Why the decline is an opportunity.

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AMD shares took a beating, along with shares of other technology companies.

Courtesy of AMD


Advanced micro-systems

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:


AMD

) 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


google

(


GOOGL

) and


Microsoft

(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]

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