AMD Approaching Levels That Present More Balanced Risk-Reward, Analyst Says

Advanced Micro Devices, Inc. AMD shares ended Wednesday's session at a record closing high of $58.90, bringing up the total year-to-date gain to 28.4%. The record run has pushed an analyst at Wells Fargo to the sidelines.

The AMD Analyst

Aaron Rakers downgraded AMD from Overweight to Equal-Weight and increased the price target from $55 to $64.

The AMD Thesis

Wells Fargo is positive on AMD's competitive positioning and share gain story, but shares are approaching levels that present a more balanced risk-reward profile, Rakers said in a Thursday note.

Based on a 2022 sum-of-the-parts analysis, shares could still present upside into the mid-$60/share range. With the new price target of $64 presenting a sub-10% upside opportunity, the analyst deemed it fit to move to the sidelines.

With the March 5 Analyst Day in mind, Rakers presented an analysis based on his expectation the company will unveil a new revenue segmentation to improve visibility into growth drivers.

Potential Revenue Segmentation

The analyst estimates that Data Center accounted for 13-15% of 2019 revenues, with 70-80% of it coming from EPYC Server CPUs and 20-30% from Radeon Instinct GPUs.

AMD could give more details on a Data Center GPU roadmap at the Analyst Day, Rakers said.

The Computing segment, according to Rakers, accounted for 65-70% of 2019 revenues, with the break-up being about 70% from client CPUs and about 25-30% from Radeon GPUs and about $130 million coming from Samsung IP license.

Semi-Custom revenues stood at about 12% of AMD's revenues in 2019, the analyst said.