Advanced Micro Devices (NASDAQ:AMD) shares have retreated by 24.5% from their all-time high reached in March this year. The pullback is partly down to fears AI expectations have been too high, particularly in closing the gap with industry leader Nvidia. Some investors were also disappointed with the company’s Q1 earnings report, which fell short of robust AI growth projections. Additionally, the stock’s high valuation has discouraged some investors.
However, none of these items are much of a concern for Edward Jones analyst Logan Purk, who believes AMD is ready for another leg for growth.
“The company has emerged as the only viable alternative to NVIDIA chips in the data center, which should allow AMD to benefit from market growth and customers’ desire to lessen their dependence on one company for chip supply,” says Purk, who makes the case that the “growing demand for data-center infrastructure should help drive accelerating sales of AMD’s chips, in particular graphics processing units (GPUs) and central processing units (CPUs).”
As for the valuation issue, AMD currently trades at around 29 times Purk’s 2025 earnings estimates, which is actually below its historical average of 35, thus making the shares “attractively valued.”
Another element to consider that might be getting overlooked revolves around the 2022 acquisition of Xilinx, of which Purk thinks the “positive impacts are not yet fully realized.” Xilinx has brought new products and end-markets to AMD’s portfolio and Purk thinks the company is still in the initial stages of cross-selling and integrating Xilinx and AMD products. According to management, this could result in over $10 billion in “cross-selling opportunities.”
Lastly, despite the recent rebound in PC markets, Purk believes that AI-enabled PCs could extend the upgrade cycle, as well as lead to higher pricing, thereby fostering “higher growth” in the PC market.
“We believe our optimism is not fully reflected in the share price,” Purk summed up, as he initiated coverage of AMD stock with a Buy rating and added the shares to his Stock Focus List. Purk, however, has no fixed price target in mind. (To watch Purk’s track record, click here)
The Street, in general, does have one, and it currently stands at $191.03, suggesting the stock will post growth of ~20% over the coming months. On the rating side, most analysts share Purk’s view, with AMD’s Strong Buy consensus rating based on a mix of 29 Buy recommendations vs. 7 Holds. (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.
