Bank Of America Likes Intel, Advanced Micro Devices; Keep An Eye On Analyst Day

Vivek Arya of Bank of America provided an update on semiconductor stocks under his coverage. Here is a summary of some of the analyst's findings during the first quarter.

Better Pricing But Lower PC Units

• PC microprocessor chip units fell 10 percent quarter-over-quarter and down 3 percent year-over-year.
• Advanced Micro Devices, Inc. AMD and overall PC average selling prices were up 17 percent quarter-over-quarter and 7 percent year-over-year, driven partially by the new Ryzen product.
• Intel Corporation INTC's PC client unit share remained roughly steady at 91 percent while AMD's also remained steady at 9 percent.

PC MPU

• First quarter PC client (desktop and notebook) MPU shipments fell 3.4 percent year-over-year.
• PC inventories remain "mostly in check" as total PC client MPU shipments fell 10.1 percent in the quarter, which was in line with seasonal trends.
• PC client unit share between Intel (91.4 percent) and AMD (8.6 percent) also remained unchanged in the quarter.
• AMD did gain 150 basis points of share in desktop but this was offset by Intel's gain in notebooks.

A Closer Look At Ryzen

The analyst's research concluded that AMD shipped 307,000 Ryzen units in the quarter, of which 76 percent were high-end products. Ryzen also sold at ASP of $248, which implies $76 million in Ryzen-related revenues in the quarter.

Overall, Ryzen contributed a 20 percent improvement in AMD's total MPU ASP.

Game Consoles

Arya further noted AMD's semi-custom unit shipments allocated toward game consoles fell 24 percent quarter-over-quarter but did grow 2 percent from a year ago. AMD likely benefited from the tail-end of the PlayStation VR/PS4 Pro and an Xbox console ramp, which started in the third quarter.

Stock Recommendations

AMD remains Buy rated with a $16.50 price target as the company could report operating margins "well above" the Street's expectations from new product launches. Also, the company's upcoming analyst day on May 16 could prove to be the next catalyst for the stock.

Intel remains Buy rated with a $42 price target as the company's future is less exposed to the PC market and better positioned to benefit from faster growing and profitable segments such as cloud computing, 3D memory, Internet of Things and software markets.

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