Morgan Stanley Upgrades AMD, Says 'Table Is Set Well' For 2020

A cautious stance on Advanced Micro Devices, Inc. AMD over the past year was "obviously" the wrong call but the "table is set well" for 2020, according to Morgan Stanley.

The Analyst

Morgan Stanley's Joseph Moore upgraded Advanced Micro Devices from Underweight to Equal-Weight with a price target lifted from $17 to $28.

The Thesis

Investors had reason to hold a bearish stance on AMD over the past year as the Street's estimates looked too high around graphics inflation, Moore wrote in a note. This scenario played out over the year as most of the Street's downward revision in estimates is due to graphics and a notable decline in the cryptocurrency industry.

Much has changed in AMD's favor, Moore said, including continued delays from rival products at Intel Corporation INTC and Nvidia Corporation NVDA's heavy investments in ray tracing. As such, AMD faces an opportunity to enter an era of "sustained profits."

AMD has multiple near-term catalysts to spur growth, including a cloud gaming opportunity where the company has a key advantage over rivals. Specifically, Nvidia is showing an interest in pursuing higher margin GeForce Now implementations and AMD boasts a strong relationship with console developers.

Aside from gaming, AMD continues to seek "creative" ways of monetizing its graphics chips.

Price Action

Shares of Advanced Micro Devices were trading higher by 4.5 percent to $30.84 Thursday morning.

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