Advanced Micro Devices, Inc (NASDAQ:AMD) is gaining market share from Intel Corporation (NASDAQ:INTC), and one analyst says the market is too worried about AMD’s graphics card business.
The Analyst
Bank of America analyst Vivek Arya reiterated his Buy rating for AMD and raised his price target from $17 to $20.
The Thesis
Slumping cryptocurrency mining demand for GPUs will be a headwind for AMD’s sales, but Arya said AMD bears may be putting too much emphasis on crypto mining. He said AMD’s Ryzen and EPYC products have tremendous pricing and gross margin upside, and Bank of America projects AMD’s share of combined PC and server sales will double from 4 percent to 8 percent by 2020.
Arya also raised his earnings estimates for AMD. Arya raised his 2018 EPS estimate from 45 cents to 50 cents and his 2019 EPS estimate from 60 cents to 70 cents. The new estimates are above consensus Wall Street projections of 45 cents and 60 cents, respectively.
Bank of America estimates AMD had about $200 million of cryptocurrency mining-related GPU sales in the first quarter of 2018. Arya said AMD bears seem to be ignoring the rest of AMD’s GPU business, which is perfectly healthy.
“As we head into 2019, AMD likely benefits from strong underlying growth among gamers (new Navi launch expected in 2019, as successor to Vega), and professional workstation users,” Arya said.
In the longer-term, Arya said AMD is the only legitimate threat to market leaders Intel and NVIDIA Corporation (NASDAQ:NVDA).
Price Action
AMD stock traded lower by 6 percent on Monday, trading around $14.88 at time of publication.
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