AMD Is Doing What It's Told: Taking a Breather

It's a bad habit in business journalism: referring to a stock, a company or even a sector in the first person - as if they are listening, have feelings, and are able to react and respond to specific events.

Well shares of chipmaking giant Advanced Micro Devices (AMD) - Get Report proved the exception on Thursday, actually doing what analysts at Wells Fargo Securities told them to do: Take a breather.

Shares of AMD were down 1% at $58.26 in morning trading after Wells Fargo analyst Aaron Rakers cut his recommendation to equal weight from overweight, though raised his one-year price target to $64 from $55.

In a note to clients titled, “Time for a Breather,” Rakers said that while he remains positive on AMD overall, a near-170% run-up in the company's shares on a year-over-year basis, combined with a stock price that is approaching level discounting 2022 per-share earnings of more than $2.50, that it's time to, well, take stock.

Of course, both AMD and the chip sector more generally have a lot of positives going for them, namely shrinking supply in the wake of last year's chip glut and a rebound in demand at the hands of new types of consumer and commercial technology and goods.

And AMD made new highs on Monday - despite its brethren posting declines - in the wake of Alphabet-owned Google’s (GOOGL) - Get Report announcement that it plans to roll out an updated suite of cloud computing offerings powered by AMD’s second-generation Epyc server CPUs (codenamed Rome).

All of that should drive the likes of AMD higher over the longer term, says Rakers. But for now, as he put it to clients, it's "time for a breather."

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