Bernstein Pumps The Brakes On AMD: 'Expectations Have Soared'

Advanced Micro Devices, Inc. AMD shares have climbed 62 percent year-to-date. Yet AMD’s fundamental performance may not be as rosy as the market seems to think, according to Bernstein. 

The Analyst

Bernstein analyst Stacy Rasgon on June 20 reiterated a Market Perform rating on Advanced Micro Devices with a $13 price target.

The Thesis

The potential of AMD’s Ryzen and Epyc product offerings and the 10nm struggles of Intel Corporation INTC have drawn Wall Street's attention in recent months, Rasgon said in a Wednesday note. (See the analyst's track record here.) 

The CPU business has been relatively flat, and Ryzen gains have been offset by declines in legacy products, the analyst said. Instead, Rasgon estimates that GPU sales have been AMD’s primary driver, jumping 80 percent in 2017 and another 200 percent in the first quarter of 2018.

Vega benchmarks were disappointing to gamers when launched, Rasgon said, adding that he suspects the vast majority of AMD’s GPU growth in the past year has come from cryptocurrency mining.

If that scenario is true, the inevitable drop-off in cryptocurrency mining demand would need to be offset by Vega sales; if not, Rasgon said AMD could face some serious pricing pressure in coming quarters.

“We understand the potential appeal of the long-term AMD story, but expectations have soared, and an uncertain GPU outlook [keeps] us sidelined for now,” Rasgon said.

The stock could become more attractive once cryptocurrency mining noise has dissipated, the analyst said. 

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