AMD Analysts Bet On Continuing Momentum Amid Tailwinds, Execution, Intel Missteps

Advanced Micro Devices, Inc. AMD shares are trading in record territory after the chipmaker reported stellar quarterly results.

The AMD Analysts

Piper Sandler analyst Harsh Kumar reiterated an Overweight rating on AMD and increased the price target from $60 to $82.

Rosenblatt Securities analyst Hans Mosesmann maintained a Buy rating and increased the price target from $70 to $120.

Benchmark analyst Reuben Roy has a Hold rating on AMD.

BofA Securities analyst Vivek Arya reiterated a Buy rating and hiked the price target from $77 to $100.

Morgan Stanley analyst Joseph Moore maintained an Equal-Weight rating and increased the priced target from $56 to $73.

UBS analyst Timothy Arcuri maintained a Buy rating and moved up the price target from $52 to $70.

Product Ramps to Bolster Competitive Positioning: Overall, AMD is executing to its plan, and Ryzen processors meant for desktops and laptops, and EPYC meant for servers, are helping the company take share across the board, Kumar said in a note.

Sever product ramps scheduled for the back half of the year, including Ryzen in client compute and Milan in server, will continue to bolster the company's competitive positioning, according to Piper Sandler.

AMD's Prospects of Doubling In Size Over Next Several Years Achievable: Mosesmann said AMD enjoyed a multitude of tailwinds in the first half, including accelerating server EPYC2 and notebook Ryzen 4000 share gains, new CPUs in desktops and servers, new GPUs in gaming and data center and two new game console ramps at Sony Corp SNE and Microsoft Corporation MSFT.

The company is actively increasing 7nm wafer starts at Taiwan Semiconductor Mfg. Co. Ltd. TSM in a tight environment.

The year 2021 is looking to be the year AMD surpasses 25% x86 server/desktop/notebook unit share mark seen back in 2006, Mosesmann said.

"With Intel in a multi-year organizational and business model transition (trying to recover from its 7nm delays), we see no technical or structural hurdle for AMD to capture over 40% of the x86 CPU in coming years," the analyst wrote in the note.

Given the secular opportunity within a nearly $80 billion TAM compute market, Rosenblatt sees AMD's prospects of doubling in size over the next several years as quite achievable.

Intel Could Fight Back to Thwart AMD's Share Gains Intel's escalating manufacturing issues could keep AMD's near-term momentum going, Roy said. Intel's recent strategy and personnel changes reflect a more aggressive move toward setting its house in order.

This, according to the analyst, could make longer-term server share gains more challenging for AMD. AMD's current valuation does not discount this possibility.

See Also: Intel Analysts See End Of 'Computing Dominance' Amid 7nm Node Delay, Competitive Threat

AMD The Only Company That Can Challenge Both Intel and Nvidia: AMD's pipeline, management execution and opportunity set is materially enhanced due to secular tailwinds in its core PC, gaming, and cloud markets, coupled with share gain opportunity due to Intel's missteps, Arya said.

The analyst sees AMD's EPS power heading to $3 by calendar year 2023.

AMD is the only company that can challenge two large incumbents Intel and NVIDIA Corporation NVDA in a $50 billion addressable market opportunity in PC, server, high-end gaming, deeplearning and related markets it has less than 10% value share currently, Arya said.

Additionally, the company's model allows for semi-custom product and licensing options with potential customers, which would create further leverage in the model.

AMD Is Executing Well: The breadth of demand upside across markets is surprising, and the strength in microprocessors has outlasted weakness in graphics and consoles, Moore said. The analyst noted that server was slightly above his estimates.

AMD is experiencing some nice tailwinds in the second half, including a rebound in cloud gaming from very low levels in the second quarter and new product launches across the stack in the fourth quarter, the analyst said.

AMD is executing well with exposures to the strongest parts of the compute space such as hyperscale in data center, consumer for client, and gaming.

UBS Finds It Hard to Justify AMD's Current Valuation: AMD faces a significant uphill battle in data-center GPUs versus Nvidia, given the importance of software ecosystem, and AMD's enterprise value relative to Intel is already far in excess of where it peaked during the last data center share gain cycle, UBS analyst Arcuri said.

"Analytically, it has become hard for us to justify valuation," the analyst said.

Despite the window of opportunity and potential staying power for AMD, UBS said it is still hard-pressed to argue at this point for significant upside to its financial model.

AMD Price Action: AMD shares were jumping 11.77% to $75.57.