Intel Corporation INTC shares have reacted positively to the company's announcement concerning the appointment of VMware, Inc. VMW top brass Pat Gelsinger as its CEO.
In a sympathy move, shares of rival chipmaker Advanced Micro Devices, Inc. AMD pulled back, as investors perceive Intel's move as negative for the company.
The AMD Analyst: BMO Capital Markets analyst Ambrish Srivastava downgraded AMD from Market Perform to Underperform and reduced the price target from $80 to $75.
The AMD Thesis: AMD has done a "tremendous" job under CEO Lisa Su, Srivastava said in the downgrade note.
The valuation of AMD shares reflected the near-flawless execution under Su, the analyst said.
Intel's missteps opened up a "blue sky" scenario for AMD, helping it to gain market share at the expense of Intel, driving its valuation even higher, he said.
Related Link: AMD Analyst Projects Strong Start To 2021 For Chipmaker
AMD's share gains in servers will likely moderate in 2020, as a result of which the consensus estimates will prove optimistic, Srivastava said.
BMO said its price target assumes AMD continuing to trade at a rich valuation, although lower than where it is currently trading.
The price target assumes AMD shares trading at a PE multiple of 35 times the firm's calendar year 2022 EPS estimate of $2.15.
AMD Price Action: AMD shares lost 1.08% Thursday, closing at $90.79, following a 3.8% pullback Wednesday.
Related Link: Option Trader Bets $2M On Advanced Micro Devices Following CES Presentation
Photo: VMWare.
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