Amid so much uncertainty and chaos in 2020, there’s one thing you can depend on: Advanced Micro Devices (AMD) will continue charging ahead. It has been five years of incredible gains for the chipmaker, up by an amazing 2,284% since 2015.
As the second half of 2020 nears, is it time for sentiment to swing negative on AMD shares?
Not in the slightest, argues Northland analyst Gus Richard. Rather, the 5-star analyst expects “a strong 2H for AMD.”
The analyst’s assumption is based on a belief that with so many possible macro headwinds on the horizon, the companies destined to perform well are those with a “robust product cycle,” and accordingly, AMD fits the bill.
“In our view, AMD is well positioned for 2H:20 as new game consoles launch for the holiday season, and server market share gains accelerate as Milan ramps in Q4. Moreover, we believe these products are relatively immune if the macro weakens,” said Richard.
It should be noted that the highly anticipated release of AMD’s third-generation EPYC processors, code-named Milan, is expected later this year. Based on AMD’s 7nm Zen 3 architecture, the CPU will be able to take on practically any task in the data center market. Richard believes “Milan’s performance will demonstrate how far ahead AMD is in terms of performance in the server market.”
As for that other catalyst, Sony’s PlayStation 5 and Microsoft’s Xbox Series X will be launching in time for the 2020 holidays, with both containing custom made AMD chips.
Not only does Richard argue AMD will perform well through the uncertain 2020 macro landscape, but he also believes one specific headwind could actually fuel further sales.
Richard explained, “We believe COVID-19 likely will amplify demand for new game consoles during the holidays. We are conservatively modeling console revenue to be a little over a $1 billion in CY20. We would expect consoles to be supply limited and demand to remain strong into Q1 driving upside to our model. In addition, as the holidays approach there will likely be a flood of publicity to stoke demand.”
To this end, Richard has an Outperform rating on AMD in tandem with a $67.50 price target. Investors will be pocketing a 26% gain, should the analyst’s thesis play out over the next year. (To watch Richard’s track record, click here)
The rest of the analyst fraternity is split into two main factions when considering the chipmaker’s prospects. However, the bulls have a slight edge. Based on 14 Buys, 10 Holds and 1 Sell, the consensus marks AMD as a Moderate Buy. At $56.43, the average price target implies upside potential of 5%. (See AMD stock analysis on TipRanks)
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