Beating Intel on most metrics has become commonplace for Advanced Micro Devices (AMD) in recent years. While Intel delivered a solid quarterly report last week, the Street’s reaction was tempered by the company’s uncertain future. AMD will report Q4 earnings today after the bell, and in contrast to the issues plaguing its rival, RBC analyst Mitch Steves believes AMD has no such problems right now.
“Heading into the Dec-qtr print,” the 5-star analyst said, “We remain positive on AMD and wouldn’t be surprised to see a beat and raise quarter with potential for the firm to generate revenues at or above the high-end.”
So, what to look out for?
Steves thinks PC demand, GPU demand and improving server trends are the reasons why “revenue has high potential for upside.”
That said, with several new products to push, the analyst says it is “unlikely that yields are high on the initial batch of chips,” and gross margins won’t “begin to beat until Q1/Q2,” when yields are likely to rapidly improve and gross margins should begin to climb higher.
Looking ahead, Steves anticipates “above seasonal Q1 guidance,” as the company is set to benefit from PC and server share gains.
Also coming up, is the pending closure of the Xilinx acquisition. The deal is expected to be settled before the end of the year. The analyst believes within the first 12-18 months there is “potential for $300M to $600M in communications revenue synergies,” and expects significant margin expansion overtime as the semiconductor powerhouse builds “economies of scale.”
Summing up his investment thesis, Steves said, “We remain positive on the AMD story given the pullback (competitor announcements). Our view is that share gains will continue until the beginning of 2023 at minimum.“
All in all, Steves rates AMD shares an Outperform (i.e., Buy), while the price target gets a nudge upwards. The figure moves from $100 to $105, suggesting room for upside of ~11%. (To watch Steves’ track record, click here)
So, that’s RBC’s view. What does the rest of the Street have in mind for AMD ahead of the print? The stock currently has a Moderate Buy consensus rating, based on 14 Buys, 6 Holds and 2 Sells. The average price target clocks in at $97.53 and suggests modest upside of 4% from current levels. (See AMD stock analysis on TipRanks)
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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.
