Shares of Advanced Micro Devices (AMD) have been on the backfoot this year, in what is a real anomaly for the habitual high-flyer of recent years.
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The case of a technology stock losing its luster is a familiar one in 2022 and does not always reflect a business’s prospects. Looking at AMD, Stifel’s Ruben Roy knows the reason for the downturn but as the shares have already dropped by 40% year-to-date, any risks are likely already factored in, while the future holds plenty of promise too.
“Looking ahead,” said the 5-star analyst, “we believe that AMD’s expanded IP portfolio and the ability to offer platform solutions will likely emerge as a competitive advantage. From a near-term perspective, while fears of a potential peak in PC market momentum are likely to continue, we believe that recent share price weakness reflects those concerns.”
Key to Roy’s bullish thesis is the company’s continued execution of its product roadmap. This was in evidence recently, with the launch of its Zen 4 based Ryzen 7000 series, the “first 5nm based x86 CPUs available for desktop PCs.”
Its strong product line has allowed it to gain share in the Client Computing and Server markets and Roy thinks any bearish trends in the PC segment can be countered by a general compute TAM (total addressable market) in the hyperscale/cloud sector which will probably generate ongoing opportunities for “faster than historical growth” for the main processor sellers.
What’s the TAM we’re talking about? In its June Analyst Day, AMD stated that with the addition of IP gained when the company bought Xilinx its wing, it sees its core end market segments as representing a $135 billion opportunity. And as its custom solutions and wide-ranging IP portfolio clock a fast-growing “opportunity set,” moving forward, AMD believes that its TAM can increase to $300 billion.
As such, over the next few years, Roy expects this will drive “continued above-market growth and expanding profitability.”
Based on all the above, Roy initiated coverage of this stock with a Buy rating backed by a $122 price target. What’s in it for investors? Potential returns of 43% over the coming year. (To watch Roy’s track record, click here)
29 analysts have thrown the hat in with AMD reviews over the past 3 months, and these consist of 19 Buys, 7 Holds and 1 Sell, all resulting in a Moderate Buy consensus rating. Going by the $119.83 average target, the shares will be changing hands for a 40% premium a year from now. (See AMD stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
