Barclays On AMD: 'Turnaround Under Way, But Already Pricing In Some Success'

Advanced Micro Devices, Inc. AMD has been the best performing semiconductor stock year-to-date. Citing execution as historically being “the key challenge” for AMD, Barclays’ Blayne Curtis recommended being on the sidelines until the company “shows better progress.” The analyst initiated coverage of Advanced Micro Devices with an Equal Weight rating and a price target of $7.

The company’s shares have surged 142 percent YTD, versus a 26 percent gain in the SOX. Positive sentiment has been driven by new product offerings and potential share gains, Curtis mentioned.

Transformation In Early Stages

Advanced Micro Devices does offer potential, given its renewed focus on the discrete GPU market, which is estimated to reach ~$6 billion in 2016, as well as the company’s commitment to delivering products consistently.

The analyst pointed out, however, that the company is in the early stages of its planned transformation and that it “still faces an uphill battle to recapture meaningful share and achieve sustained profitability.”

While the strategy proposed by the new management team seems appropriate and the company has taken steps in the right direction, execution has historically been the key challenge for Advanced Micro Devices. Curtis stated that the company needs to show better progress, particular with the Zen server offering, since this has the highest potential to impact estimates.

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