Bank Of America Cuts AMD Target By 10%, Still Bullish In The Long Term

Advanced Micro Devices, Inc. (NASDAQ: AMD) has taken quite a beating in the past three months, but one Wall Street analyst said Thursday even lowered 2019 expectations for AMD suggest significant upside for investors.

The Analyst

Bank of America analyst Vivek Arya reiterated his Buy rating for AMD stock but lowered his price target from $30 to $27.

The Thesis

Near-term issues with cryptocurrency demand and the timing of the launch of the “Rome” EPYC server chips suggest AMD’s business might not begin to regain its traction until the second half of 2019.

In the meantime, Arya said there have been four recent indications that the near-term outlook for AMD may be difficult:

• Pricing checks suggest margin pressures.
• Management commentary from Micron Technology, Inc. (NASDAQ: MU) management on memory inventory levels was cautious.
• Commentary from AMD and NVIDIA Corporation (NASDAQ: NVDA) management at recent events and conferences has suggested a weak market.
• Nvidia’s most recent guidance suggested it will take several quarters for the market to recover.

Arya said the next potential bullish catalyst for AMD investors will be the CES conference, which kicks of Jan. 8. There’s a chance AMD could unveil a new product or two at the event, which could jump-start the stock. However, Arya said long-term AMD investors have nothing to worry about regardless of the near-term trading action.

“We view it as the only company that can challenge two large incumbents INTC and NVDA in a $50bn+ addressable market opportunity in PC, server, high-end gaming, deep learning and related markets where AMD has less than 10% value share currently,” Arya said.

Price Action

AMD's stock was down 2.5 percent Thursday to $17.70 per share. The stock is down 43 percent in the past three months.

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Photo courtesy of AMD.