The analyst kept his rating of outperform on shares of the semiconductor maker.
“We are raising our [earnings] estimates on AMD, as we believe fundamentals remain strong for the firm,” Steves wrote in a commentary. “Our checks on gaming and data center suggest modest upside to numbers and will likely help quell fears around a weaker organic story, given the unconfirmed Wall Street Journal article stating AMD may purchase (XLNX) - Get Report.”
The Journal reported last week that Xilinx could be bought by its chipmaking rival AMD.
AMD shares recently traded at $83.80, up 0.81%. AMD has soared 81% year to date amid investor enthusiasm for big technology companies during the coronavirus pandemic.
AMD is scheduled to report third-quarter earnings Oct. 27.
“Our sense is that the set-up into earnings has improved, as some investors believe AMD is seeing weaker demand (hence the need to potentially purchase another data center company,” Steves said.
“We anticipate upside to gaming numbers, due to higher than expected demand; upside on PC CPUs, as well given the continued strength from WFH [work-from-home] initiatives; … and steady share gains on the server side.”
Steves said that “overall, we anticipate a beat and raise (move to high-end of range, $2.64B vs. guide of $2.45-2.65B) but don't believe gross margins at the company level will materially change vs. guidance due to console sales seeing upside.”
“We are raising our estimates and price target on AMD due to healthy demand across all segments: gaming, PCs and data center,” he said.