Goldman Analyst Was Spot On With His Bearish Advanced Micro Devices Thesis, Sees Further Downside

Taking a contrarian stance is always a risky proposition.

Advanced Micro Devices, Inc. AMD was a high flier for much of 2016, clocking in gains of 295 percent. And ahead of Tuesday's slide, the stock had made an incremental 20 percent run in the year-to-date period, hitting a 52-week high of $15.20 on February 27, just ahead of the March 2 launch of its Ryzen processor.

Lone(ly) Bear

It was at this time, Goldman Sachs analyst Toshiya Hari issued the firm's contrarian call. On April 6, Hari initiated coverage of AMD with a Sell rating and $11 price target. The stock lost over 6 percent on the day.

The logic behind the call? Shares had already priced in a sharp improvement in its competitive and financial position. Hari predicted the stock underperforming the market after its analyst day in May.

Incrementally Negative After Q1

AMD reported an in-line loss of $0.04 per share, failing to post upside the bulls were anticipating.

As noted by CNBC, the analyst singled out second-quarter gross margin guidance as a negative, given that the launch of Ryzen desktop processor in March had heightened expectations.

Hari said shares are currently "priced for perfection" at 33 times his 2019 estimated earnings per share. Accordingly, the analyst recommended investors to stay cautious.

'Show Me' Story

"AMD stock remains a 'show me' story as the market has, in our view, pre-traded the expected improvement in market share, GMs and ultimately EPS," CNBC said, quoting the analyst.

As such, the analyst lowered his price target to $10.60 from $11, while reiterating his Sell rating.

AMD shares closed were down 24.3 percent at $10.30.

Related Links:

The Hype Surrounding Advanced Micro Device's Ryzen Product Launch

Bank Of America: AMD, Cavium And Cypress Could All See 50% Upside

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