Advanced Micro Devices (NASDAQ: AMD) ended last Tuesday trading with a higher stock price after their price target was revised higher by Wall Street analysts. Despite the revision, analysts are still cautious about AMD's long term future.
Cowen analyst Matthew Ramsay raised his price target for AMD from $47 to $60. "With [the] shares up 65% since our last preview, we are increasingly both confident (in fundamentals) and nervous (on valuation)," said Ramsay. Of note, according to Ramsay, was a considerable change in Investor attitude since Q3. In general, AMD's investors seem to be more optimistic of the company, "Our queries continue to shift to 'when,' not 'if,' in terms of share gains and earnings-per-share/free-cash-flow growth, as investors largely no longer question whether or not AMD will gain material x86 share or deliver upon its road maps," said Ramsay of the matter.
The optimistic atmosphere surrounding AMD largely stems from its landmark successes as of late. Highly efficient and very competent leadership has helped steer AMD to its recent successes, including a 304% increase in the stock price over the last two years. AMD's surge in market prominence is helping it to challenge contemporaries Nvidia (NASDAQ: NVDA) and Intel (NASDAQ: INTC), with the company poised to snatch away some of Nvidia's share of the graphics card market, and possibly even some of Intel's share of the desktop computer market. Further fueling AMD's rampant successes is its unchallenged dominant presence in the console gaming market, as AMD's processors have powered two eighth-generation console giants, Microsoft's (NASDAQ: MSFT) Xbox One and Sony's (NYSE: SNE) Playstation 4, and will be utilized once again in the Playstation 5 and Xbox Series X.
Despite AMD's success, many experts are advising caution. Deutsche Bank analyst Ross Seymore, who was one of the analysts to raise their price target, advised caution. "[But] with tailwinds from Intel's missteps likely to lessen, competitive intensity likely to rise, and AMD shares trading at nearly 40 times our Pro-forma 2021 estimated earnings per share, we see upside potential to both our estimates and the share price as being challenging," Ross said. Ross' warnings directly address major catalysts to AMD's successes, such as missteps by Intel that resulted in the creation of an opportunity for AMD to up the ante.
AMD's recent successes are directly threatened by a resurgence by Intel and Nvidia, which has been noted repeatedly as the cause for experts' caution. Nvidia is set to launch new products this year that could directly challenge AMD's recent releases that enabled it to snatch shares of the graphics card market from Nvidia. Additionally, Intel's hiccups are only temporary setbacks, and the company will likely make moves to compensate for the recent shortcomings. Intel also stands to capitalize on the field of artificial intelligence and data center products, as evident by the purchase of Habana Labs and Intel's plans for the startup moving forward.
The consensus regarding AMD, as such, is "watch and wait." The company's recent successes cannot be understated, but AMD's successes possibly being snatched away by its competitors is an all-too-real possibility that could leave investors out to dry if they are not cautious.