Analysts Remain Divided On AMD After Earnings Beat

Advanced Micro Devices, Inc.AMD shares were up 5.8 percent Wednesday after the company’s fourth-quarter earnings report topped lofty market expectations.

A number of Wall Street analysts weighed in following the report. 

Voices From The Street

• Bernstein analyst Stacy Rasgon said revenue growth was strong and new products have been well-received. “However, the substantial YoY revenue growth in 2017 was likely due even more to GPUs than it was to Ryzen, a trend likely to continue for now, and which makes modeling into 2019 highly dependent on how one chooses to model the crypto trajectory,” Rasgon said
• Morgan Stanley analyst Joseph Moore said it has become increasingly difficult for even stronger earnings to justify the stock’s share price. “Ethereum's 300-percent move since October should continue to drive strong mining revenues and the core business has some interesting growth potential, but we still struggle to see enough earnings potential to justify upside to the stock price,” he said. 
• B Riley FBR analyst Craig Ellis said investors need patience given the huge run-up in the stock in recent weeks. “Even allowing for some early 4Q MPU ships into 1Q’s builds, DCG already looks like it could be tracking handily above 1Q forecasts, a clear plus for upside server MPU, DRAM, NAND, and power management demand among other components,” Ellis said. 
• Bank of America analyst Vivek Arya said AMD is approaching an inflection point in its server business in 2018. “We believe the Street is underestimating the size of the computing pie in a strong global economy where cloud capex is rising 20-30 percent annually and they only have two vendors to turn to — INTC and AMD,” Arya said.
• Stifel analyst Kevin Cassidy said AMD’s new products are driving the company’s revenue growth. “AMD’s revenue performance may be catching up to its share price valuation, but we are waiting for evidence of significant GM expansion to justify the earnings valuation,” Cassidy said. 

Ratings And Price Targets

Despite the big quarter, Wall Street remains mixed on the outlook for AMD stock given its current valuation:

• Bernstein has a Market-Perform rating and price target lifted from $12 to $13.
• Morgan Stanley has an Underweight rating with an $8 price target.
• Bank of America has a Buy rating with an $18 price target.
• Stifel has a Hold rating with a $13 price target.

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