AMD stock now at a ‘reasonable valuation’ after near-50% pullback, Morgan Stanley says

If the rise of semiconductors comes to an end, Advanced Micro Devices Inc. could be in the best position to hold back, Morgan Stanley analysts wrote on Wednesday.

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shares traded slightly higher on Wednesday, while other chip makers fell overall after Morgan Stanley resumed stock coverage. Analyst Joseph Moore set an overweight rating and a price target of $ 103, and wrote that the company “offers potential for solid numbers at a fair valuation”, given its sale close to 50% of the maximum of late November.

“Overall, we are optimistic that the company’s outlook on the data center (CPU, GPU and FPGA) will provide enough growth to drive more positive revisions of estimates over the coming quarters,” Moore said in a note.

AMD bolstered its data center offerings when it closed its purchase of Xilinx in February. Xilinx specializes in field programmable door arrays, or FPGAs, chips that a customer or designer can configure after making them. These chips, in turn, are used as accelerators in data centers to increase computing power and improve energy efficiency in existing physical spaces.

“The apprehensions we see in consumer-linked end markets should leave AMD less exposed compared to its key competitors, which will allow us to subscribe to conservative numbers that shouldn’t come as much of a downside,” Moore said.

Analysts are concerned that the explosion in semiconductor sales amid a pandemic-affected supply crisis could lead to a severe drop in the coming months as inventories pile up and customers stop shopping. This has been a major factor in a sharp drop in chip stocks during the first half of the year.

For more information: why semiconductor stocks are “almost non-reversible” despite earnings records amid global shortages

“While it seems likely a digestion phase on computers and consoles, and we’re budgeting a bit of caution next year, we believe that server strength (with more market share gains) should allow the company to continue recording solid growth with a now reasonable valuation “. said Moore.

Earlier this month, AMD forecast an average annual revenue growth of about 20% over the next three to four years, although it remained in its annual and second-quarter forecast provided in early May.

Analysts surveyed by FactSet expect revenue of $ 6.4 billion for the second quarter, compared to $ 6.3 billion and $ 6.7 billion estimated by AMD and $ 26.2 billion for the year, according to AMD estimates of about $ 26.3 billion.

Shares of AMD, in the last check, rose around 1%, while the PHLX Semiconductor SOX index,
dropped 1%.

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