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Monday, April 04, 2022 8:12:40 AM
By: Zacks Investment Research | April 4, 2022
I've written about Advanced Micro Devices (AMD) as the Bull of the Day several times this year.
That's because it continues to maintain its status as a Zacks #1 Rank Strong Buy after analysts keep raising estimates.
But there's always a bull-bear battle somewhere in Semis and last week brought us this naysayer warning about the PC and gaming markets...
Barclays downgrades AMD to Equal Weight from Overweight
Analyst Blayne Curtis slashed the firm's price target from $148 to $115, saying that "the company's growth story needs a pause" with cyclical risks looming in 2023.
"AMD remains positioned to gain market share this year in both the client and server markets, but cyclical risk across several of its end markets, including PC, gaming and broad-based, will come in 2023," said the analyst. He believes all three segments are running at elevated levels, which poses risk to AMD's growth trajectory.
Well, that's one view in a diverse sea of bull-bear perspectives. Here was the rebuttal on the same day, March 31...
AMD weakness on competitor downgrade a buying opportunity
Rosenblatt analyst Hans Mosesmann said AMD share weakness today is being driven by a competitor downgrade on 2023 cyclical issues, "angst on potential consumer weakness in PCs and mobile" even though he says AMD does not sell into this market, and a potential price war with Intel (INTC Quick QuoteINTC - Free Report) .
However, Mosesmann contends that AMD is "not in any jeopardy" of missing its 30% year-over-year sales growth target for 2022 as he views AMD being set to gain significant data center market share, which "is the thrust of the investment thesis, not a PC market that is up or down 5%."
And here was a broader view of the Semi market from BofA on March 25...
BofA tactically most constructive on "MANGO" stocks in U.S. Semiconductors
The PHLX Semiconductor Sector Index (SOX) is down 11% year-to-date versus the S&P 500's decline of 5%, noted BofA analyst Vivek Arya, and his recent discussions with investors about the US Semiconductors sector "have overwhelmingly been focused more on cycle worries like peaking demand and rising capex than on company fundamentals," the analyst wrote.
However, as long as global GDP remains above trend, semi stocks are attractive and the "structural importance of semis to the rapidly digitizing global economy cannot be overstated," Arya contends. In that context, Arya made a "crude attempt at constructing a fang equivalent in semis" and came up with "MANGO," an acronym that stands for Marvell (MRVL), Broadcom (AVGO), AMD (AMD), Analog Devices (AMD), NVIDIA (NVDA), GlobalFoundries (GFS) and ON Semiconductor (ON)
Arya identifies these Semi stocks as those which he is tactically most constructive about. He has "high conviction" that these names are "levered to the right end-markets with solid demand visibility and consistent execution," Arya added.
Here's how I view the unique position of AMD, from my recent articles...
The Rise of a Duopoly in HPC and AI
AMD has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focused company from a pure-bred consumer PC and gaming chip provider.
And after another beat-and-raise quarter -- where the Lisa Su starship offered guidance for Q1 EPS that was 30% above consensus Street estimates -- the stock is on its way back to the old highs.
AMD has emerged as a strong challenger to NVIDIA's (NVDA) dominance in the GPU (graphic processing unit) market based on its Radeon technology. Launch of 7 nanometer (nm)-based AMD Radeon RX 5700-series gaming graphics card family featuring RDNA architecture, high-speed GDDR6 (Graphics Double Data Rate type 6) memory and support for the PCIe 4.0 interface, has helped the company increase presence among gamers.
Since the technology of GPU chips for gaming has driven the R&D for high-performance computing (HPC) and artificial intelligence (AI), AMD has joined NVDA in the "category of two" where enterprises and scientific research institutions must have their technologies to crunch large amounts of data at hyper-speed.
In fact, many use both companys' chipsets to foster "dissimilar redundancy" in platform architecture, performance, reliability, and sourcing.
Bottom line on AMD: I still believe shares are a bargain near $100 and would continue to recommend them to investors.
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