A glance at the stock chart shows
had a less-than-inspired beginning to the year. Shares were nearly flat through the second quarter, leaving investors with not many reasons to be excited about the pricey buy.
But the stock has done an about-face in the past couple of weeks, since the company posted strong earnings on July 27. Shares of Advanced Micro Devices (ticker: AMD) have surged 22%, setting new highs along the way.
In afternoon trading Monday, the stock was down 0.7% to $109.30. The S&P 500 also was off, 0.1%, although the Nasdaq Composite was up 0.2%.
BMO Capital Market analyst Ambrish Srivastava jumped on the bandwagon over the weekend. In a note, Srivastava upgraded his rating to Market Perform from Underperform, and raised his target price to $110 from $80. The new estimates are based on a multiple of 31 times 2023 earnings.
Srivastava offered an apology of sorts: “We have clearly been wrong in our Underperform call on shares of AMD.” He wrote that while he tends to be patient, he had to acknowledge that earnings estimates for next year have jumped and couldn’t justify his Underperform rating anymore.
The analyst had maintained the equivalent of a Hold rating for roughly three years until he downgraded to Underperform in mid-January. His bearish shift was justified, Srivastava said, because the company’s rich valuation was partly a result of missteps by rival
(INTC) over the past few years, and because AMD’s share gains against Intel would slow in 2022.
Srivastava noted that AMD’s earnings and revenue projections could climb higher still. The chip maker will probably ramp up production of its powerful data-center graphics and processing chips even more. The “wins” aren’t reflected in current estimates, Srivastava said.
Even though AMD’s share gains will slow as Intel’s next generation chips roll out, “AMD has now executed and delivered to a point that it has carved out a position as a viable alternative to Intel for the foreseeable future,” he wrote.
Of the analysts that cover AMD stock, nearly 60% rate shares a Buy, and about 40% have a Hold rating. There is a single Sell, and the average target price is $112.76.
Write to Max A. Cherney at [email protected]