Bank Of America Lowers Advanced Micro Devices Price Target

Bank of America reiterated its Underperform rating on Advanced Micro Devices, Inc. AMD Friday and cut its price target from $3.25 to $2.25.

Analysts led by Vivek Arya believed “AMD faces structural challenges from Intel in PC and data center, and from Nvidia in discrete graphics. Management has done a good job of controlling costs and de-risking the balance sheet and game console wins at Sony and Microsoft (and potentially Nintendo for next-gen Wii) can help support cash-flow for the next few years."

Arya also believed “the declines in legacy segments will continue to weigh on financials. We lower 2015/16E sales and pro-forma (ex-options) EPS to 22c/27c from 31c/38c, and PO to $2.25 from $3.25, based on 0.6x 2015 EV/S which is below its 5-year average of 0.8x and reflects our caution on future EPS growth prospects and structural competitive risks.”

The analyst noted indicated that the new price target “implies 10x 2015 PE, which is at low-end of semis sector, again reflecting our caution.”

Advanced Micro Devices closed at $2.57, up 0.78 percent.

Editor's note: A previous headline for this story said Bank of America raised its price target.