On Wednesday, Evercore ISI maintained its positive stance on Advanced Micro Devices, Inc. (NASDAQ:AMD), raising its price target to $198 from $193 while reiterating an Outperform rating. The firm's optimism is based on AMD's position as a leading supplier in the merchant accelerator market.
AMD's shares experienced an 8% decline in aftermarket trading following its earnings report, which showed a third-quarter performance that met expectations but provided a fourth-quarter earnings per share outlook that fell 10% short of forecasts. Despite this, Evercore ISI encourages investment in AMD, citing the company's continued market share gains.
The analyst highlighted AMD's successful strategy in the CPU market against competitors like Intel (NASDAQ:INTC), and now its focus on AI workloads with its MI300 solution. AMD reported $1.5 billion in sales for its MI300 solution in the third quarter and raised its 2024 revenue outlook to $5 billion, up from the previously projected $4.5 billion.
Looking forward, the analyst expects AMD to benefit from further market share gains in server CPUs and growth in its client PC business. This forecast is supported by a new product cycle expected in the second half of 2025 and increased demand anticipated due to the end-of-life of Windows 10 in mid-2025.
In other recent news, Advanced Micro Devices (AMD) has revised its revenue forecast upwards for its upcoming MI300 product, from over $4.5 billion to more than $5.0 billion. However, the company anticipates that the MI300 will initially have a dilutive effect on profit margins, impacting the stock valuation.
Citi has adjusted its outlook on AMD shares, reducing the price target to $200 from the previous $210, citing reduced gaming margins and margin dilution from the MI300. Barclays (LON:BARC), while maintaining its Overweight rating on AMD, has reduced the price target from $180 to $170 due to potential headwinds in the client segment.
In other recent developments, OpenAI has announced a collaboration with Broadcom (NASDAQ:AVGO) Inc. and Taiwan Semiconductor Manufacturing Company (TSMC) to create its inaugural in-house artificial intelligence chip, incorporating AMD chips to satisfy its growing infrastructure needs. This strategy aims to manage costs effectively.
AMD has projected its fourth-quarter revenue to be slightly below market expectations, attributing the shortfall to supply chain constraints affecting its ability to fulfill the robust demand for AI chips.
These recent developments highlight AMD's ongoing role in the rapidly evolving AI and semiconductor industries.
InvestingPro Insights
Recent data from InvestingPro adds depth to Evercore ISI's bullish outlook on Advanced Micro Devices (AMD). Despite the post-earnings dip, AMD's market cap stands at an impressive $269.07 billion, reflecting its significant position in the semiconductor industry. The company's revenue for the last twelve months reached $23.28 billion, with a notable 8.88% quarterly growth in Q2 2024, aligning with the analyst's expectations of continued market share gains.
InvestingPro Tips highlight AMD's strong performance, noting a significant 72.85% return over the past year and a robust 20.09% return in the last three months. These figures support Evercore's positive stance on the stock. Additionally, AMD's liquid assets exceeding short-term obligations suggest financial stability as the company pursues growth in AI workloads and server CPUs.
It's worth noting that AMD is trading at a high P/E ratio of 198.13, indicating investor confidence in future growth prospects, particularly in areas like the MI300 solution mentioned in the article. For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips on AMD, providing a deeper understanding of the company's financial health and market position.
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