Why Intel's CEO Transition Is A Negative For AMD: Analyst

Intel Corporation INTC shares have reacted positively to the company's announcement concerning the appointment of VMware, Inc. VMW top brass Pat Gelsinger as its CEO.

In a sympathy move, shares of rival chipmaker Advanced Micro Devices, Inc. AMD pulled back, as investors perceive Intel's move as negative for the company.

The AMD Analyst: BMO Capital Markets analyst Ambrish Srivastava downgraded AMD from Market Perform to Underperform and reduced the price target from $80 to $75.

The AMD Thesis: AMD has done a "tremendous" job under CEO Lisa Su, Srivastava said in the downgrade note.

The valuation of AMD shares reflected the near-flawless execution under Su, the analyst said.

Intel's missteps opened up a "blue sky" scenario for AMD, helping it to gain market share at the expense of Intel, driving its valuation even higher, he said.

AMD's share gains in servers will likely moderate in 2020, as a result of which the consensus estimates will prove optimistic, Srivastava said.

BMO said its price target assumes AMD continuing to trade at a rich valuation, although lower than where it is currently trading.

The price target assumes AMD shares trading at a PE multiple of 35 times the firm's calendar year 2022 EPS estimate of $2.15.

AMD Price Action: AMD shares lost 1.08% Thursday, closing at $90.79, following a 3.8% pullback Wednesday.

Photo: VMWare.