Despite the recent dip in Advanced Micro Devices (NASDAQ:AMD) stock over the past few months, investors have reaped the rewards of the 2023 tech bull market, witnessing year-to-date gains of 47%.
With the chip giant readying to report Q3 earnings next Tuesday (Oct 31), can the stock regain its early year momentum?
That remains to be seen, although Deutsche Bank analyst Ross Seymore expects a decent showing. “We expect a solid report & guide from AMD as the co continues to compete for share in both server CPUs & AI accelerators,” said the 5-star analyst. “Given ongoing cyclical pressures on server CPU spend, AMD may deliver slightly below the targeted +50% H/H growth in its DC segment, but with the co’s commentary on its MI300 launch/ramp likely being more important.”
Regarding the latter point, Seymore thinks that CSPs (cloud service providers) are actively seeking an alternative supplier for data center GPUs due to the existing shortages of Nvidia products. It’s possible AMD will step in to fulfill this role in 2H24, however, Seymore anticipates that there will be discussions among investors regarding the timing (still expected in the second half of 2024) and how significant it will be.
As for the numbers, boosted by ongoing cyclical recovery in PCs and new product ramps in Data Center, Seymore is calling for revenues of $5.71 billion (+7% sequentially, +3% year-over-year), in line with consensus and about the same as the guide’s midpoint ($5.4-6.0 billion). On the bottom-line, Seymore sees the company delivering PF EPS of $0.69, closely matching the Street at $0.68.
Looking ahead to Q4, Seymore projects sales of $6.41 billion (up 12% quarter-over-quarter), in line with consensus forecasts of $6.40 billion. Both Seymore and the Street expect a pro forma EPS of $0.89.
That said, while Seymore calls AMD ‘impressive,’ Seymore maintains a Hold rating due to his revenue estimates for FY 2024 falling below the Street’s +20% (Seymore’s estimate is 15%) and concerns about the potential valuation-limiting effects of increased competitive intensity, particularly from Nvidia’s AI leadership and Intel’s resurgence. However, Seymore maintains a price target of $115, offering 21% upside potential from current levels.” (To watch Seymore’s track record, click here)
Seymore, though, is amongst a minority on Wall Street. 6 others join him on the sidelines, but they are countered by 22 Buys, making the consensus view a Strong Buy. Going by the $137.29 average target, a year from now, shares will be changing hands for a 45% premium. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
