Argus On AMD's Earnings: Sustainable Growth Prospects Lead To Upgrade

Advanced Micro Devices, Inc. AMD's fourth-quarter earnings report on Tuesday was compelling enough for Argus to turn bullish on the stock.

The Analyst

Argus' Jim Kelleher upgraded AMD's stock rating from Hold to Buy with an $18 price target.

The Thesis

AMD's earnings report made it clear that the business model boasts a sustainable path toward profitability — along with top-line and bottom-line growth — over time, Kelleher said in the upgrade note. As the company moved beyond the seasonally strong second half of 2017, its outlook remains favorable, as evidenced by top-line guidance for the first quarter which came in 25 percent ahead of consensus estimates.

AMD continues to benefit from improving execution in its high-cost and high-performance products, the analyst said. This positions the company well to take advantage of the global momentum in multiple categories, including client and server compute, graphics processing, consumer gaming and electronics, along with "promising" markets in cloud data center, artificial intelligence, machine learning, blockchain and others, according to Argus.

Although AMD's profit margins are not yet "industry competitive," the company's growth potential will increase over time and the company will start closing the gap with its stronger peers, Kelleher said. 

Price Action

Shares of AMD were trading lower by around 0.2 percent ahead of Thursday's market open.

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