AMD's Setup Gives Rosenblatt Securities Deja Vu

Advanced Micro Devices, Inc. AMD has been of the tech sector's hottest stocks in 2018. Now that shares have made it to the $30 mark, one analyst is raising their price target bar even higher.

The Analyst

Rosenblatt Securities analyst Hans Mosesmann reiterated a Buy rating on AMD and raised the price target by 33 percent from $30 to $40.

The Thesis

AMD resembles NVIDIA Corporation NVDA stock three years ago, prior to its 1,100-percent gain, Mosesmann said in a Tuesday note. (See his track record here.) 

AMD stock is already up 194 percent year-to-date, but Mosesmann said there could be significantly more upside in the mid-to-longer term.

After a recent meeting with suppliers in Taiwan, Mosesmann said demand for certain AMD GPU “compute” SKUs and Intel Corporation INTC PC CPUs has created a capacity “tightness” that will likely last for the next several quarters.

“The above dynamic suggests to us that AMD’s pre-emptive thrust with its 7nm GPU compute offerings (ramping in 1Q18 and one to two quarters ahead of AMD’s own 7nm-based EPYC2 CPUs) is a ramp that could mirror or improve on the current overall EPYC CPU ramp (5-percent share 12-18 months from launch and 10 percent 12 months later), for 2019-20." 

The analyst cautioned investors that CPU market share gains tend to occur relatively slowly compared to the meteoric gains in AMD stock in recent months, suggesting a pullback is within the realm of possibility if expectations overheat in the near-term.

Rosenblatt is forecasting a 5-percent server CPU market share for AMD in Q4 of 2018 and up to 10-percent market share over the next four to five quarters.

Price Action

AMD shares were trading near-flat at the time of publication Tuesday at $29.90. 

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