On Wednesday, Cantor Fitzgerald adjusted its price target on shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) to $170 from the previous target of $190. The firm retained its Overweight rating on the stock. The adjustment follows AMD's recent performance and projections, which have indicated supply limitations and a mixed outlook for various segments of its business.
The semiconductor company's earnings leverage for the calendar year 2024 (CY24) did not meet investor expectations, which has been a key point of disappointment.
Despite AMD's MI300 ramp being recognized as impressive, supply constraints have capped the potential revenue, with management adjusting guidance to $4 billion, despite indications that there could be sufficient high-bandwidth memory (HBM) to support $5-6 billion.
AMD's Server and Client CPU segments performed better than anticipated in the March quarter, with expectations for a strong second half of CY24 bolstered by a faster ramp for the Turin vs. Genoa processors and AI PCs driving higher units and average selling prices (ASPs).
Still, this optimism is tempered by a forecasted significant decline in the Gaming segment for the second quarter and a slower recovery in the Embedded segment.
The updated revenue projections for CY24 and CY25 are now set at $25.5 billion and $30.5 billion, respectively, marking growth of 13% and 20% but falling below the consensus estimates of $25.8 billion and $32.4 billion. Correspondingly, earnings per share (EPS) are expected to be $3.40 and $5.00 for CY24 and CY25, which are also below the consensus of $3.65 and $5.52.
The revised stock price target of $170 is based on approximately 34 times the new CY25 EPS estimate. Despite the lower near-term fundamental outlook and consequent impact on the stock, the long-term perspective for AMD remains positive, particularly as the company continues to pursue the AI market opportunity, where it is positioned as the second merchant AI supplier behind NVIDIA (NASDAQ:NVDA).
The firm suggests that at a price level of around $140, the stock could offer an upside of approximately 20%.
InvestingPro Insights
Advanced Micro Devices, Inc. (AMD) has been the subject of notable investor focus, and recent data from InvestingPro offers additional insights. With a market capitalization of $255.96 billion and a high P/E ratio of 302.95, reflecting its growth expectations, AMD stands out as a prominent player in its industry.
Its revenue for the last twelve months as of Q4 2023 stands at $22.68 billion, despite a slight decline of 3.9%. However, the quarterly revenue growth in Q4 2023 was positive at 10.16%, suggesting some resilience in the face of broader market challenges.
InvestingPro Tips highlight that AMD is expected to see net income growth this year and operates with a moderate level of debt, which can be reassuring for potential investors. These factors, combined with the company's significant role in the Semiconductors & Semiconductor Equipment industry, may justify the high earnings multiple at which the stock is trading.
On the other hand, the stock price has experienced volatility, with a notable decline over the last month, yet it has achieved a high return over the last year. Prospective investors should note that AMD does not pay a dividend, directing its focus on growth and reinvestment.
For readers looking to delve deeper into AMD's financial health and market position, more InvestingPro Tips are available, which can be accessed by visiting https://www.investing.com/pro/AMD. Additionally, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a total of 17 InvestingPro Tips for AMD that could inform your investment decisions.
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