Northland Cuts AMD To Hold Due To ‘Negative’ Catalysts

Northland Securities cut Advanced Micro Devices’ stock to Hold from Buy and maintained a price target of $80 (3.7% downside potential) citing multiple negative potential risks related to the sector as well as the company.

Northland analyst Gus Richard pointed to slowing data center demand, possibility that Intel could use Taiwan Semiconductor Manufacturing as a manufacturing partner for CPU [central processing unit], and ARM [Advanced RISC Machine] penetration into the x 86 server markets as key negative catalysts for AMD (AMD). In a note to investors, Richard said that “these risks, in our view, are not reflected in AMD’s share price just unbridled optimism.”

On July 28, AMD reported better-than-expected 2Q results mainly driven by strong chip demand by data center operators and PC manufacturers. Its revenues grew 26% to $1.93 billion year-on-year and beat analysts’ expectations of $1.86 billion. EPS jumped 125% to $0.18 per share year-over-year and surpassed Street estimates of $0.16. (See AMD stock analysis on TipRanks).

Buoyed by strong quarterly performance, AMD raised its full-year revenue growth outlook. The company now forecast revenues to increase by 32% in 2020 compared with its previous guidance of 25% growth.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 13 Buys, 12 Holds, and 1 Sell. With shares up 81.6% year-to-date, the average price target of $81.30 implies downside potential of about 2.1%.