Why AMD Analysts Have Such Different Views After Massive Earnings Rally

Technology

Published: April 25, 2016 12:35 pm

Last Updated: January 13, 2020 10:20 am

Advanced Micro Devices Inc. (NASDAQ: AMD) saw a serious giveback on Monday after a massive rally on Friday after earnings. AMD guided for non-GAAP operating profitability in the second half of 2016, although this is still a situation that remains difficult for many analysts and investors to agree on for the quarters and years ahead.

24/7 Wall St. has compiled data from many different analyst research reports. The aim is not to feature AMD just with a positive or a negative view.

One driving force for investors was AMD licensing its processor and system on a chip (SoC) technology to a joint venture for China’s server market. AMD also appears to be on track to begin its joint venture with Nantong Fujitsu. Both joint ventures should generate positive cash for AMD, and CEO Lisa Su was optimistic ahead of the second half of 2016.

Again, there are many views here that conflict with each other. The aim is to show a 360-degree view.

Credit Suisse said that it was maintaining its Underperform rating, but the firm did raise its price target to $3.50 from $1.90 in the call. The firm’s John Pitzer said:

Structurally we continue to worry that AMD has quickly lost scale with a less defined Moore’s Law Roadmap and an R&D budget which is down 50% since 2008 – as such, even as new revenue opportunities emerge we suspect AMD will need (and should) accelerate spending and hence profitability is likely to remain elusive. While we have argued that the stock price over the last 6 months undervalued the significant intellectual property (IP) at AMD, it was unclear how AMD would be able to monetize said IP – the THATIC JV helps to address that issue (albeit with more questions than answers) but not the significant performance gap between AMD and Intel especially in the data center market. We see the potential for Polaris share gains in graphics and custom silicon opportunity providing some basis for sequential Rev growth (already embedded in our estimates) but not to a sustainable path of positive earnings needed to upgrade our rating – albeit, we are increasing our target price from $1.90 to $3.50 to reflect better core business, attempts at monetizing IP, and diminishing solvency issues.