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AMD Cut to Underperform at BMO on Intel CEO Change

A BMO analyst cut his rating on AMD to underperform, saying the chipmaker will be facing 'a reenergized Intel' under its new CEO.
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Advanced Micro Devices  (AMD) - Get Advanced Micro Devices Inc. Report shares were downgraded to underperform from market perform by a BMO analyst, who said the semiconductor maker could face pressure from Intel  (INTC) - Get Intel Corporation Report under its new chief executive.

At last check AMD shares were off 0.9% at $90.95, while Intel shares were up 4.7% at $59.63. Both chipmakers are based in Santa Clara, Calif.

Analyst Ambrish Srivastava, who also cut his price target on AMD to $75 from $80, said in a note to investors that he expects AMD to face "a re-energized Intel." 

The analyst referenced Intel's report that CEO Bob Swan would step down next month and be succeeded by VMware  (VMW) - Get VMware, Inc. Report CEO Pat Gelsinger.

"We have seen time and again how the right person at the helm can affect change," the analyst said. 

While Srivastava does not expect any big changes in the near term, based on "the richness of experience that Pat Gelsinger brings from his prior tenure at Intel as well as his experience running VMware, we believe he is the right person who can address the daunting, but not insurmountable, challenges that Intel faces."

Among his posts in a 30-year tenure at Intel, Gelsinger was its first chief technology officer. He became CEO of VMWare in September 2012.

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Given the series of disappointments from Intel, Srivastava said even a few incremental steps ought to catalyze the shares.

AMD "has done a tremendous job under its CEO," Lisa Su, and its "valuation reflects the near flawless execution under her watch," Srivastava said. 

"However, we do think a large part of the rich valuation is also attributable to how poorly Intel has executed."

This, in turn, the analyst said, "has opened up a 'blue sky' scenario for how much share AMD could gain vs. Intel driving valuation even higher."

"While we do not have all the answers, our scenario analysis suggests that AMD's share gains in servers should moderate out in 2022, which is reflected in our calendar year 2022 estimates," Srivastava said." 

"Thus, we believe consensus estimates will prove to be optimistic." 

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