Analysis: AMD's Intel Deal Lends Almost 100% Upside To The Stock

Advanced Micro Devices, Inc. AMD may have some major upside ahead, and investors have a rival semiconductor company to thank. AMD announced a new semi-custom deal with Intel Corporation INTC on Monday that could provide a boost for AMD investors.

The Analyst

Canaccord Genuity analyst Matthew Ramsay.

The Rating

Canaccord Genuity maintains a Buy rating and $20 price target for AMD's stock.

The Thesis

Intel will now be using AMD’s Vega GPU in its multi-chip high-end notebook packages. These light-weight notebooks priced at or above $1,000 represent roughly 15 percent of the global notebook market. Ramsay said the Intel deal is a stamp of approval for AMD’s technology.

“As such, we reiterate our positive thesis on AMD which is further underwritten by management's ability to monetize the portfolio as strong near-term crypto-currency GPU demand, stronger Ryzen sales and first Ryzen Mobile launches should alleviate risks in Q4/17," Ramsay wrote, "while H2/18 sets up as an inflection point with our industry checks indicating 7nm chip development timelines remain intact for what should prove even stronger CPU products across AMD's roadmap versus Intel during 2H/18 and 2019."

In the long term, Canaccord believes AMD can reach annual EPS of at least $1.25 by 2020. Ramsay said the Intel deal alone could contribute an additional 10 cents per share to AMD earnings in 2018.

The Intel deal will also serve to ease the fears of investors who were concerned that AMD was beginning to lose its GPU momentum in the gaming market.