Advanced Micro Devices, Inc.
The AMD Analyst: Suji DeSilva initiated coverage of AMD stock with a Buy rating and a $125 price target, which suggests a roughly 9% upside from current levels.
The AMD Thesis: AMD's differentiated portfolio of high-performance compute/networking processors, and accelerators represents a strong investment opportunity, said DeSilva in a note.
The analyst said that the Santa Clara, California-based company has gained a share in the data center infrastructure market. He added that the company's x86-based server processor market share increased from about 10% in 2020 to 25% by the middle of the calendar year 2023.
AMD beat rival Intel Corp.
DeSilva said that AMD has strong leverage to AI infrastructure growth, with its new MI300X AI accelerator likely gaining traction in the fast-growing market opportunity. AMD can better compete with Nvidia Corp.
The analyst expects AMD's AI Instinct product sales to more than double quarter-over-quarter to $400 million in the fourth quarter, with revenue accelerating further to $2 billion in 2024.
AMD's data center revenue will likely grow 36% year-over-year in the fourth quarter and 61% in 2024, the analyst said, citing his checks.
DeSilva said that the chipmaker will also benefit from the cyclical opportunity in Gaming and Client PC recovery. " While overall consumer demand has remained muted, we nonetheless expect these segments to exhibit a recovery progression over the next several quarters," he added.
For the fourth quarter, the analyst forecast revenue and earnings per share of $6.1 billion and $0.77, respectively, roughly in line with the consensus.
On valuation, DeSilva said the $125 price target is arrived based on 33 times multiple of the calendar year 2024 earnings per share estimate. He said this is at a premium versus the 26 multiple for the overall technology sector, adding that the valuation is justified, given AMD's relative growth opportunity.
AMD Price Action: In pre-market trading on Tuesday, AMD stock rose 0.33% to $117.17, according to Benzinga Pro data. So far this year, the stock has gained 80.31% compared to the iShares Semiconductor ETF's