Many investors and Street analysts are "fixated" on comparing Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corporation (NASDAQ:INTC) on unit share dynamics, but fail to price in the PC and server segment, according to Bank of America Merrill Lynch.
The Analyst
BofA's Vivek Arya maintains a Buy on AMD's stock with an unchanged $17 price target.
The Thesis
The "meaningful lift" in AMD's PC and Server pricing dynamics is driven by three factors, Arya said in a Monday note:
- The "rapidly expanding high-performance computing pie" served by the AMD and Intel duopoly.
- AMD's focus on features and performance rather than just marketing its lower prices.
- Additional upsides in servers, as AMD's EPYC is on track to hit management's 5-percent unit share goal by the end of 2018.
The potential to improve pricing in graphics cards, as the Vega GPU includes memory.
AMD EPYC's average selling price stands at $420 today, but could rise to the $600 to $700 range, which would be in-line with Intel's competing products with an ASP of $678, the analyst said. Over time, AMD's ASP would stand "well above" consensus expectations of $420 to $478.
The investment community could also be overlooking the fact that AMD has already won five of the top seven cloud customers with EPYC-1 and continues to show traction with large players like Dell and Lenovo, Arya said.
Price Action
Shares of Advanced Micro Devices were trading higher by more than 3 percent at the time of publication Monday morning.
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