More of Wall Street’s biggest names will be reporting Q1 earnings this week, one of those being Advanced Micro Devices (NASDAQ:AMD). The chip giant will deliver its latest quarterly report on Tuesday once the market action comes to a halt.
The stock had been one of the past year’s winners, enjoying the spoils of the AI-fueled tech rally. However, the story has soured somewhat more recently with the shares retreating by 25% since the early March peaks.
But if you think the upcoming print will initiate a meaningful turnaround, 5-star investor Dair Sansyzbayev would like a word.
Sansyzbayev takes a cautious stance ahead of the results on account of several factors. For one, Intel’s recent weak guide does not bode well for its peer, given that like Intel, AMD holds a prominent position in the CPU segment.
Moreover, Sansyzbayev highlights a substantial inventory challenge facing AMD. Between 2021 and 2023, inventory levels nearly tripled, while revenue only saw a 38% increase over the same period. According to Sansyzbayev, “Apart from apparent obsolescence and impairment risks, increasing inventory levels ties up cash that could potentially be reinvested in profitable growth. Having high inventory levels for longer also may force AMD to resort to discounting, which will adversely affect profitability. This is a red flag, in my opinion.”
It’s well-known that over the years, AMD has significantly closed the gap on Intel in the CPU market, but while Sansyzbayev recognizes AMD’s “long-term potential,” he believes it will be difficult for the company to compete against Nvidia in the GPU segment. However, that doesn’t mean it won’t be able to do so, given it is led by the astute Lisa Su and allocates plenty of resources to R&D. Nevertheless, for the “foreseeable future,” Sansyzbayev does not expect AMD to become a GPU leader.
As such, for now, Sansyzbayev says AMD stock remains a Sell. “The generous 20% premium to the fair value does not appear justified given the elevated inventory problem and Intel’s recent weak guidance for Q2,” he summed up. (To watch Sansyzbayev’s track record, click here)
That said, it looks like Sansyzbayev’s take does not sit well with Wall Street’s analyst community. AMD stock claims a Strong Buy consensus rating, based on a mix of 25 Buys and 7 Holds. The forecast calls for one-year returns of ~30%, considering the average target stands at $204.15. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
