Argus Sees Even More Upside For AMD

Advanced Micro Devices, Inc. AMD stock rose another 5.3 percent on Friday morning on top of Thursday's 15-percent move after a big earnings beat in the second quarter. One analyst says the stock may have even more upside ahead.

The Analyst

Argus analyst Jim Kelleher reiterated his Buy rating for AMD stock and raised his price target from $18 to $23.

The Thesis

According to Kelleher, AMD is firing on all cylinders, and its stock still looks cheap after the post-earnings rally.

“Given strong growth prospects ahead, AMD shares appear attractive at current levels,” Kelleher said in a note.

He said the highlight of the second quarter was a strong performance by AMD’s Epyc server ships, but noted Ryzen is also gaining popularity among desktop and PC users. Despite fears over cooling cryptocurrency mining demand, Kelleher said the GPU market remains solid as well. He said cryptocurrency demand will likely continue to decline, but cryptocurrency sales will make up no more than a mid-single-digit percentage of AMD’s revenue this year.

Kelleher said AMD has become consistently profitable. Although margins aren't yet in-line with industry peers, he said profits will continue to improve as AMD scales its business. Expanding gross margins and declining operating costs as a percentage of sales are indications that AMD is hitting its stride in multiple markets, Kelleher said. He said both of these positive trends should continue moving in the right direction throughout the second half of the year.

Price Action

Following Friday’s big gain, AMD stock is now up 87 percent year-to-date, trading around $18.86 at time of publication.

Related Links:

Analysts Weigh In On AMD Following Q2 Earnings Beat

AMD Weekly Options Alerts: Bulls Outnumber Bears, With Earnings Pending