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AMD Stock Higher as Bank of America Sees 'Top Catchup Candidate'

AMD has 'the strongest upward [earnings per share] revisions' among chipmakers and a 'clear path to doubling EPS,' Bank of America says.
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Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report shares rose Friday, after Bank of America designated the semiconductor maker a “top catchup candidate.”

Bank of America analyst Vivek Arya has a buy rating and $135 price target on the Santa Clara, Calif., company. 

Advanced Micro is trading at a big discount to its competitors, he noted.

AMD has “the strongest upward [earnings-per-share] revisions among chipmakers  and a clear path to doubling EPS to about $5 per share.”

He also expects AMD to gain market share from Intel  (INTC) - Get Intel Corporation Report, which is distracted by expanding into the noncore foundry market.

The stock recently traded at $109.94, up 3.2%. It has gained 14% over the past six months amid the global chip shortage.

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AMD sits among Bank of America's top three chip picks, along with Nvidia  (NVDA) - Get NVIDIA Corporation Report and Marvell Technology  (MRVL) - Get Marvell Technology, Inc. Report.

A couple weeks ago, Founder Jim Cramer said AMD is "pantsing" Intel, the largest U.S. semiconductor seller.

Morningstar analyst Abhinav Davuluri puts fair value at $109 for AMD.

“We’re raising our fair value estimate for narrow-moat AMD … from $101 on a probability-weighted basis, as we await AMD’s acquisition of Xilinx  (XLNX) - Get Xilinx, Inc. Report,” he wrote last month.

“We assess AMD’s stand-alone fair value at $98 per share (up from $91). We assign a 75% probability of AMD’s acquisition of Xilinx closing, and our fair value for the combined entity would be $112 per share.”

Further, “management is confident in the firm’s product pipeline for 2021 and now expects 60% revenue growth for the full year (up from 50%),” Davuluri said. “We believe this guidance should be easily attainable.”

AMD, Marvell and Nvidia are holdings in Jim Cramer's Action Alerts PLUS investing club. Want to be alerted before Jim Cramer buys or sells the stocks? Learn more now.