AMD Stock Experiences a Downturn on Thursday
Advanced Micro Devices (AMD) is experiencing a mixed outlook following a recent downgrade by Barclays and a price target cut. The investment bank downgraded AMD’s stock and lowered their price target, reflecting concerns after AMD's recent earnings and market challenges.
The downgrade occurred on Thursday, and Barclays now rates AMD stock as "equalweight" (i.e., hold). Despite this, investors have been selling AMD shares, causing them to fall by 6.1% as of 11:25 a.m. ET.
AMD reported strong second-quarter financials, with 32% year-over-year revenue growth to a record $7.7 billion, and generated record free cash flow. The CEO, Dr. Lisa Su, expressed confidence in significant growth for the second half of the year, driven by new product ramps and market share gains.
Barclays predicts sales growth for AMD could exceed 31% in fiscal 2022. However, they also expect cyclical risk to arrive across several end markets (PC, Gaming, and broad-based/XLNX) by 2023. The investment bank still sees uncertainty about how much progress Intel has made in closing the process gap with AMD’s chips.
Other analysts remain optimistic, with the majority recommending buy or hold and price targets near $184-$190. For instance, Wedbush increased its price target for AMD to $190 and maintains an "outperform" rating, emphasizing board confidence reflected in a $6 billion share repurchase plan.
However, Barclays slashed its price target for AMD stock by 22%, to $115 a share. The worst Barclays sees for AMD is a $115 stock price, suggesting a relatively low downside risk.
Key risks for AMD include intensifying competition, particularly from Nvidia and Intel, geopolitical exposure to China (24% of revenue), and regulatory constraints impacting product sales, particularly in AI data center hardware.
Investors should weigh AMD’s strong fundamentals and growth prospects against near-term competitive pressures and market volatility. Despite AMD stock running up 47% over the past year, Barclays does not recommend buying AMD now due to the unclear future.
Investors might reconsider their approach to AMD stocks, given Barclays' downgrade and lowered price target, reflecting concerns about AMD's earnings and market challenges. Despite Barclays' prediction of potential sales growth for AMD in fiscal 2022 exceeding 31%, they also anticipate cyclical risks in multiple end markets by 2023. The uncertainties surrounding Intel's process gap closing and AMD's competition from Nvidia and Intel could influence the stock's trajectory. Consequently, investors should assess AMD's strong fundamentals and growth prospects alongside near-term competitive pressures and market volatility before deciding to invest or hold onto AMD stocks.
