BofA: AMD Investors Could Be Overlooking 3 Key Factors

Many investors and Street analysts are "fixated" on comparing Advanced Micro Devices, Inc. AMD and Intel Corporation INTC on unit share dynamics, but fail to price in the PC and server segment, according to Bank of America Merrill Lynch.

The Analyst

BofA's Vivek Arya maintains a Buy on AMD's stock with an unchanged $17 price target.

The Thesis

The "meaningful lift" in AMD's PC and Server pricing dynamics is driven by three factors, Arya said in a Monday note:

The "rapidly expanding high-performance computing pie" served by the AMD and Intel duopoly.
AMD's focus on features and performance rather than just marketing its lower prices.
Additional upsides in servers, as AMD's EPYC is on track to hit management's 5-percent unit share goal by the end of 2018.

The potential to improve pricing in graphics cards, as the Vega GPU includes memory.

AMD EPYC's average selling price stands at $420 today, but could rise to the $600 to $700 range, which would be in-line with Intel's competing products with an ASP of $678, the analyst said. Over time, AMD's ASP would stand "well above" consensus expectations of $420 to $478.

The investment community could also be overlooking the fact that AMD has already won five of the top seven cloud customers with EPYC-1 and continues to show traction with large players like Dell and Lenovo, Arya said.