5 Reasons Susquehanna Is No Longer Bearish On AMD

Despite downgrading Advanced Micro Devices, Inc. AMD to Negative in March, Susquehanna has reversed course with an upgrade, saying “A lot can change in two months.”

The Analyst

Although not quite a bull yet, Susquehanna’s Christopher Rolland issued a note upgrading AMD shares from Negative to Neutral with a price target raised from $8 to $11.

The Thesis

March’s downgrade was in response to what Rolland saw as more than 20 percent of first-quarter revenue stemming from weakening Ethereum-related GPU prospects.

Since then, a number of factors including ones pertaining to Ethereum have changed the analyst’s view of the company.

1. Bitmain’s new Ethereum ASIC chips, which had previously been concerning to Rolland, have had their value proposition “destroyed” by recent price hikes. The ASIC’s new $2,150 price tag has slashed its price-to-performance ratio by two-thirds, clearing some of the way for AMD.
2. Ethereum prices have roughly doubled since bottoming on April 6. This has driven a slight reacceleration in GPU purchases for mining.
3. AMD reported better-than-expected first-quarter earnings. EPS and sales came in at 11 cents and $1.65 billion, respectively, both beating consensus estimates. These results were driven in noticeable part by non-cryptocurrency mining products.
4. Wall Street has considerably cut back its estimates for Q3, bringing them below seasonality and de-risking some crypto headwinds.
5. Most importantly, Intel Corporation INTC announced it would push out volume production of its 10nm processors into 2019. This presents AMD the chance to compete at a similar process technology “for the first time in decades,” Rolland said. AMD is expects to sample its 7nm Zen 2 processors by the end of the year.

Price Action

Shares of AMD opened Wednesday up 1.9 percent, and were trading higher by more than 3.5 percent to $12.89 at time of publication.

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