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.
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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%.
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