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AMD stock climbs after analyst’s bullish remarks on profitability

Advanced Micro Devices (AMD) surged around 10% early Wednesday after Nomura Instinet issued a bullish statement on the semiconductor giant’s near-term revenue growth and profitability. Initiating coverage of AMD, the research firm said the company’s profit will grow sharply this year and continue to gain in the coming years, supported by strong top-line growth.

Nomura assigned a buy rating to the stock, with a price target of $33, which represents a 20% upside from the last closing price. The analyst believes that going forward, AMD will grab market share from rival chipmakers Nvidia (NVDA) and Intel (INTC). Currently, the consensus rating on AMD is hold.

Analyst David Wong said, “We think a return to sustainable profitability will help drive Advanced Micro Device’s stock value.” According to Wong, AMD stands to benefit immensely from its prowess in the ‘x86’ CPU architecture and the growing demand for GPUs.

The analyst believes that AMD will grab market share from rival chipmakers Nvidia and Intel, going forward

Considering the relatively low price, the bullish outlook makes the stock an investment option worth considering. If past performance is any indication, there is a likelihood of AMD making solid gains in the coming weeks.

In the fourth quarter, AMD’s adjusted earnings more than doubled to $0.08 per share on the back of a 6% growth in revenues. During the quarter, an increase in the sales of computing and graphics products more than offset muted performance by the Enterprise, Embedded and Semi-custom segment.

The management recently said it anticipates overcoming the weak demand for graphics chips with a competitive product portfolio, which includes the next-generation 7nm Ryzen and Radeon.

Also see: AMD stock rallies on tie-up with Google

Nomura also initiated coverage of Nvidia and Intel, sending the companies’ stocks sharply higher on Wednesday. While giving Nvidia a neutral rating and setting the price target at $147, the analyst cautioned that the chipmaker faces risks to growth from the uncertainty surrounding the demand for gaming GPU and that a possible inventory correction might drag its gaming revenues by 5% next year.

Continuing the recovery that began in the final weeks of last year, AMD shares more than tripled since the beginning of 2019. The stock, which gained 56% over the past twelve months, moved up 10% in the early hours of Wednesday’s session.

 

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