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Jan. 29, 2020, 7:11 p.m. EST

AMD stock logs worst day since summer trade war fears as ‘conservative’ outlook gives pause

More than half of analysts hike price targets on highflying stock

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By Wallace Witkowski, MarketWatch


Bloomberg News
Lisa Su, CEO of Advanced Micro Devices, speaks during a launch event in San Francisco on Aug. 7, 2019.

Advanced Micro Devices Inc. shares fell Wednesday as soft console chip sales overshadowed data-center sales and while more than half the analysts covering the highflying stock hiked price targets.

AMD /zigman2/quotes/208144392/composite AMD +1.64%  shares finished down 6% at $47.51, following an intraday low of $46.10, for their worst one-day performance since August 23, when summer trade war fears had reached a peak.

In comparison, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.64% declined 0.1% Wednesday, while the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +1.00%  advanced less than 0.1% and the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -0.12% was flat.

Of the 38 analysts who cover AMD, 14 have buy or overweight ratings, 21 have hold ratings and three have sell or underweight ratings. Of those 21 hiked their price targets, while one lowered theirs, resulting in a price target of $46.59, up from the previous day’s $43.30.

In the short term, one big headwind was AMD’s first-quarter revenue guidance of $1.75 billion to $1.85 billion while analysts surveyed by FactSet had forecast $1.86 billion. AMD blamed soft console sales ahead of Sony Corp. /zigman2/quotes/208567357/composite SNE -0.96%  and Microsoft Corp. /zigman2/quotes/207732364/composite MSFT +1.60% rolling out new consoles later in the year. For the year, AMD’s forecast of a 28% to 30% rise in revenue, versus the Street’s forecast of 28%, hinged on an improvement in the second half of the year.

Read: The problem with AMD’s data-center business

Susquehanna Financial analyst Christopher Rolland, who has a neutral rating and a $50 price target, called the forecast “a modest disappointment as buy-side expectations were likely elevated” and pointed to the stock’s incredible run.

AMD stock was the biggest gainer on the S&P 500 in both 2018 and 2019. Over the past 12 months, AMD shares have rallied 147%, while the S&P 500 has gained 24%, the Nasdaq has grown 32% and the SOX chip index has increased 50%.

Read: For chip companies, stocks soared as sales slumped in 2019 — what does that mean for 2020?

Jefferies analyst Mark Lipacis, who has a buy rating and raised his price target to $58 from $56, called the outlook “conservative” and said that the company’s March 5 analyst day should be a catalyst for the stock. Lipacis feels sales of the company’s data-center Epyc chip still has a way to go.

“We expect server share gains to accelerate as cloud customers become more familiar with Epyc,” Lipacis said.

Data-center sales were elevated in the spotlight this earnings season as longtime rival Intel Corp. /zigman2/quotes/203649727/composite INTC -0.04% reported better-than-expected data-center sales last week.

Cowen analyst Matthew Ramsay, who has an outperform rating and a $60 price target, said “not much fundamentally changed” with AMD other than the soft console sales.

“While 1Q20 came in light due entirely to console seasonality, 2020 guidance should allow investors to feel comfortable with upside to consensus,” Ramsay said. “Importantly, we believe the guidance sets the table for upward revisions throughout the year with notebook & console the largest potential upside drivers, while server growth will be of the highest magnitude.”

/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 86.71
+1.40 +1.64%
Volume: 53.91M
Aug. 6, 2020 4:00p
P/E Ratio
169.75
Dividend Yield
N/A
Market Cap
$100.16 billion
Rev. per Employee
$641,089
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/zigman2/quotes/210599714/realtime
US : S&P US
3,349.16
+21.39 +0.64%
Volume: 2.41B
Aug. 6, 2020 5:08p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
11,108.07
+109.67 +1.00%
Volume: 3.75M
Aug. 6, 2020 5:16p
loading...
/zigman2/quotes/210598361/realtime
US : Nasdaq
2,204.94
-2.62 -0.12%
Volume: 179,690
Aug. 6, 2020 5:16p
loading...
/zigman2/quotes/208567357/composite
US : U.S.: NYSE
$ 80.47
-0.78 -0.96%
Volume: 1.13M
Aug. 6, 2020 4:00p
P/E Ratio
18.96
Dividend Yield
0.38%
Market Cap
$98.88 billion
Rev. per Employee
$654,652
loading...
/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 216.35
+3.41 +1.60%
Volume: 32.63M
Aug. 6, 2020 4:00p
P/E Ratio
37.56
Dividend Yield
0.94%
Market Cap
$1611.46 billion
Rev. per Employee
$902,473
loading...
/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 48.57
-0.02 -0.04%
Volume: 23.76M
Aug. 6, 2020 4:00p
P/E Ratio
8.94
Dividend Yield
2.72%
Market Cap
$208.06 billion
Rev. per Employee
$659,665
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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