AMD Analysts Confident Of Continued Share Gains, Execution Following Chipmaker's Q1 Beat

AMD Analysts Confident of Continued Share Gains, Execution Following Chipmaker's Q1 Beat

Advanced Micro Devices, Inc. AMD reported Tuesday with strong quarterly results and lifted its full-year guidance.

The AMD Analysts: BofA Securities analyst Vivek Arya reiterated a Buy rating on AMD shares and increased the price target from $100 to $110. The analyst named the stock as the firm's top computing pick.

Oppenheimer analyst Rick Schafer maintained a Perform rating.

Mizuho Securities analyst Vijay Rakesh reiterated a Buy rating and hiked the price target from $105 to $107.

Jefferies analyst Mark Lipacis maintained a Buy rating and $110 price target.

Rosenblatt Securities analyst Hans Mosesmann reiterated a Buy rating and $135 price target.

Raymond James analyst Chris Caso reiterated an Outperform rating and increased the price target from $100 to $110.

BofA Says AMD On Track For Long-Term Earnings Power: BofA now sees a path to over $4 in long-term earnings per share, premised on 25%-plus market share in a growing $70 billion-plus computing market, Arya said in a Wednesday note.

AMD's stellar performance came despite industrywide supply constraints and competition from rival Intel, Inc's INTC Ice Lake server processor, the analyst said.

He highlighted improving supply for AMD due to its close relationship with supply partners; new product ramps, including Milan server processors, Ryzen 5000 mobile processors, and Radeon 6000 GPUs; and share gains.

BofA estimates that AMD's market share of CPU will increase from 14% in the first quarter to 15% in 2021, with gains of over 300 basis points, annually over the next three years.

Some of the risks for AMD are tough comparisons in 2022 and beyond and heightened competition from Intel and new Arm entrants, Arya said. 

AMD's Execution Encouraging, Oppenheimer Says: The strong growth of AMD's Computing & Graphics segment underlines PC market share gains, with particular strength in high-end, ultra-thin, commercial and gaming notebooks, Schafer said.

AMD's notebook unit share may reach 25% in 2021, the analyst said, citing channel checks.

The enterprise, embedded and semi-custom segment's revenues more than doubled, led by servers, and within the segment, semi-custom sales grew robustly, primarily due to refreshed gaming consoles, he said. 

"Mgmt continues to execute well despite tight supply, and AMD's design win outlook is encouraging," Schafer said in the note.
Uncertainty around the market's competitive response, particularly from Intel, and tight supply curbing upside keeps Oppenheimer on the sidelines, the analyst said. 

Why Mizuho Says AMD Well-Positioned: AMD highlighted strength in Server EPYC processors, which grew 100% year-over-year, as third-gen Milan is ramping well with key hyperscale and enterprise customers, Rakesh said in a note. 

The company sees a strong second half versus the first half, premised on data center and gaming console ramps, the analyst said. 

"We continue to see AMD well-positioned, with a margin-accretive XLNX acquisition ahead, a strong 7nm/5nm Server roadmap ahead of INTC, Milan ramp in Server/DC driving GMs, and new gaming console cycle," he said. 

Why Jefferies Expects Continued AMD Share Gains: AMD likely gained 170 basis points of share in servers from the previous quarter and 340 basis points in PC, Lipacis said.

The analyst said he expects continued share gains.

The anticipated share gains are premised on Intel's commitment to IDM, which makes AMD's transistor leadership and share gains highly probable, he said.

Secondly, in the data center segment, AMD's x86 GPU, ARM, FPGA, and semi-custom offerings position it to become the go-to partner to CSPs striving to develop custom processors, Lipacis said. 

Jefferies' four-year EPS power for AMD increases to $7.40, the analyst said.

Next 2 Years Are Unique For AMD, Rosenblatt Says: Stronger growth trends in all segments, better visibility, and improved supply prospects on both the front and back end of production all culminated in a clean beat-and-raise print, Mosesmann said.

"AMD's next two years are a unique planetary alignment of many years of work that will be made more prominent on a continued favorable competitive dynamic in x86 CPUs, in our opinion," the analyst said.

On the client side in PCs, Ryzen is becoming pervasive on all categories in terms of size and end markets, he said.

The server EPYC ramp, Mosesmann said, is more powerful in the current 2021/22 cycle given that both Rome and Milan are driving growth in 2021 and the scheduled launch of 5nm-based Genoa EPYC in 2022.

"We see AMD blowing past historical ~25% unit peak share seen over 15 years ago in x86 as the company's roadmap now becomes dominant in terms of core counts, performance, efficiency, cost structure, and roadmaps," the analyst said. 

RayJay Doesn't View AMD's Valuation SA Stretched: It's now clear that AMD is gaining much more share than expected, and the company is poised to gain 12 points of cloud server share this year, Caso said.

That share gain, coupled with solid graphics and console revenue, allowed AMD to raise full-year guidance to grow revenue 50% year-over-year growth, the analyst said. 

The little client growth for the second half implied by the 2021 guidance helps to de-risk the riskiest end market, he said.

"Given our $3 2022 earnings power, the likelihood of upside continued 2023 growth, and back-to-back years of nearly 50% revenue growth, we don't find the valuation to be stretched at just under 30x." 

AMD Price Action: At last check, AMD shares were down 0.72% at $84.60. 

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