Advanced Micro Devices Price Target Raised at RBC

Advanced Micro Devices should see continued gains in PCs, pushing its market share in that area to the mid-20% range, RBC analyst Mitch Steves says, lifting his price target 19%.
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Advanced Micro Devices  (AMD) - Get Report shares advanced after RBC Capital analyst Mitch Steves raised his target price on the semiconductor giant's shares to $63 from $53 and affirmed his outperform rating.

“We think share gains in PCs will continue to move into the mid-20% market share range, and we have higher conviction in server units in both 2020 and 2021,” Steves wrote in a report.

He expects bullish news to come out of AMD’s analyst day on March 5. He anticipates a gross-profit margin target in the high 40% area. Steves sees the company announcing a “path to 30% market share in CPU servers.”

And he awaits “an implied estimated 2021 earnings ... well north of $2 per share, likely around $2.30-$2.60.”

Morningstar analyst Abhinav Davuluri is less enthusiastic about the stock, pegging its fair value at $19. 

“While we believe AMD will enjoy share gains, we question the sustainability of these gains in the face of larger peers with greater resources,” Davuluri wrote in a report Jan. 30. “We do not believe AMD possesses an economic moat.”

Historically, AMD had unique products catering to both the low end and high end of personal computers, he said. 

“For a decade, however, the firm has fallen behind Intel  (INTC) - Get Report as the latter has been able to leverage its scale and massive research and development budget” while AMD stumbled, Davuluri said.

And Nvidia  (NVDA) - Get Report "has taken advantage of AMD's weak positioning to capture the lion's share of the discrete graphics-processing-unit market,” he said.

At last check, AMD traded at $53.85, up 3%.

The author owns shares of Intel.