A deeper dive into the earnings release that Advanced Micro Devices (NASDAQ: AMD) posted last night suggests the semiconductor stock may be worth owning at current levels, according to a BofA analyst.
AMD earned 96 cents on a per-share basis on $7.44 billion in revenue in its fiscal Q1, with both numbers coming in handily above Street estimates.
That made Vivek Arya, a senior Bank of America analyst, raise his rating on AMD stock to “buy” on Wednesday.
Shares of the multinational chipmaker are currently down well over 20% versus their year-to-date high.
AMD is strongly positioned to sustain demand
In his research note, Arya agreed that Advanced Micro Devices is significantly behind Nvidia in the data centre accelerators.
However, the demand for its products will likely retain momentum as AMD has built a name for itself as a “stable second source alternative in GPUs.”
Over time, as the company based out of Santa Clara, CA continues to improve its technology and AI products, it may steal market share from rivals, potentially leading to a stock price rally.
Additionally, the Bank of America analyst sees “continued share gains against the incumbent” on the CPU front as well.
Note that AMD stock does not currently pay a dividend.
AMD stock has a huge total addressable market
According to AMD chief executive Lisa Su, new restrictions on the export of sophisticated chips to China under the Trump administration could result in a $1.5 billion hit in 2025.
But that isn’t specific to Advanced Micro Devices. Its larger peer, Nvidia, has warned of billions of dollars worth of hits due to export controls in Q1 as well.
Therefore, BofA’s Arya raised his price target on AMD shares this morning to $120, which translates to more than 20% upside from current levels.
The Bank of America analyst remains bullish on the Nasdaq-listed firm also because it has a “multi-hundred billion addressable market opportunity in PC, server, high-end gaming, deep learning,” whereas its penetration currently sits at less than 30%, indicating massive room for growth.
Wall Street agrees with BofA on Advanced Micro Devices
Advanced Micro Devices now sees its sales coming in at $7.4 billion in its current financial quarter on a gross margin of about 43%. In comparison, analysts had called for $7.25 billion in revenue only.
“While we face some headwinds from the dynamic macro and regulatory environments, including export controls, they’re more than offset by the powerful tailwinds from our leadership product portfolio,” Su told investors on the earnings call last night.
Investors should note that BofA isn’t alone in keeping bullish on AMD stock.
The consensus rating on the chipmaker also currently sits at “overweight” with the mean target of $131, indicating potential upside of about 30% from here.
The post AMD is a ‘stable second source for GPUs’: is that enough for AMD stock to rally? appeared first on Invezz