Analyst Mitch Steves, who maintains an outperform rating on the Santa Clara, California-based company, pointed to improving data center demand and AMD's optimism on margin ramps through 2020.
Steves said in a research note to investors that he expects the company to earn $1.30 a share in 2020, an increase from an earlier forecast of $1.24. In addition, Steves now expects AMD will earn $1.73 a share for 2021. Previously, he had called for earnings of $1.68 a share.
Wall Street is looking for earnings of $1.10 a share in 2020 and $1.51 for 2021. The analyst said the higher estimates stem from "solid channel checks" for both gaming chips and products used in data centers.
Steves said that "as data center demand ramps up and gaming sales come in better than feared, as we expect, this should lead to higher gross margins relative to current Street expectations.”
The analyst said he was attempting to be "ahead of the curve" and believed "estimate raises for semiconductors broadly (and AMD) will begin in Q1.”
Last week, Piper Jaffray analyst Harsh Kumar raised his price target for AMD to $40 from $35 while keeping a neutral rating.
AMD was named No. 4 in TheStreet's 25 Best Stocks of the Year listing. The stock has gained more than 120% in 2019 and more than 20-fold from its early-2016 lows.
In October, AMD reported mixed third-quarter results with revenue that slightly missed estimates, in-line earnings and mixed guidance.