Advanced Micro Devices stock looks more attractive following upbeat earnings and a lower share price, making it a Buy, according to Daiwa Capital Markets.
Daiwa analyst Louis Miscioscia upgraded Advanced Micro Devices (ticker: AMD) to a 1-Buy, the firm’s highest rating, up from a 2-Outperform. The analyst also raised his price target to $150, up from $140.
“AMD delivering on its multiyear growth strategy,” Miscioscia wrote in a research note on Wednesday. “For 4Q21, results were above the high end of guidance and the company gave very strong guidance for 1Q22 and the full year, even after strong raises every quarter all year.”
AMD had a strong fourth quarter, bringing in $4.8 billion in revenue with adjusted profits of 92 cents a share, well above Wall Street expectations for $4.5 billion in revenue and profits of 76 cents a share. The company is projecting first quarter revenues of $5 billion, up 45% from a year ago, with gross margin for the quarter of 50.5%.
Demand for AMD’s semiconductors remains strong across all areas, including PCs, data centers, graphics processing units, and gaming consoles, which could continue to drive growth, Miscioscia said. AMD currently has eight of the top 10 cloud customers, including Alphabet’s Google (GOOGL) and Microsoft (MSFT), he said.
“Part of AMD’s continued growth is that they are seeing firm orders and goodvisibility in cloud demand for both internal applications and more instances, and as such have signed up for increased foundry capacity,” he wrote. AMD doesn’t manufacture the chips it designs, relying instead on so-called foundries such as Taiwan Semiconductor Manufacturing.
The stock rose 3.6% to $132.85 on Wednesday, but has lost 7.7% so far this year, battered by rising Treasury yields that have been hitting technology stocks. This price decline is an opportunity to buy, Miscioscia said.
Other analysts have taken a wait-and-see approach, with 16 out of the 41 analysts covering the stock surveyed by FactSet rating it a Hold. Only one analyst rated it a Sell, while 24 rated it a Buy.
Key risks to Daiwa’s bullish take include macroeconomic shocks that could pause spending on IT, disruptions to data center architecture, or faster than expected declines in the PC market, he said.