AMD Share Price Target Slaughtered By Wall Street – But It Isn’t The Company’s Fault

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Chip designer Advanced Micro Devices, Inc (AMD) has become the latest target of bearish Wall Street sentiment, as lower peer multiples caused analysts to cut the company's share price target despite another strong earnings report. AMD revealed its first quarter of 2022 earnings earlier this week, and the company delivered both revenue and net income growth as it benefited from higher chip prices, a stronger enterprise sales environment, and the acquisition of field-programmable gate array (FPGA) manufacturer Xilinx.

Wall Street Analysts Cite Slowdown In Personal Computing Market As Reason Behind Reducing AMD Share Price Target

All of the share price target reductions came yesterday, as the followed AMD's earnings report for the first quarter of 2022. They saw the different Wall Street firms lower the chip company's price target to range between $98 and $150. The highest price target part of today's list, which includes only those firms that have changed their estimates of AMD's share price performance, is from KeyBanc.

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KeyBanc analyst John Vinh cut down AMD's price target to $150 from $165 yesterday, even as he praised the company's strong earnings and data center performance. Vinh's optimism about AMD's shares is reflected in the fact that despite reducing the share price target due to peer multiples, the analyst keeps an Overweight rating on the shares. This indicates a preference of holding a larger quantity of the company's shares compared to the average in a portfolio of balanced investments.

Next in line is Jefferies analyst Mark Lipacis, who lowered the share price target to $147 from $155. In a detailed note, the analyst outlined that AMD's server revenue share grew in the first quarter, as opposed to Intel, which lost market share. Despite a slowdown in the personal computing market, Jefferies is optimistic that AMD will still grow its market share in the sector, and believes that the next potential catalyst for the share price is the company's investor day expected held next month.

Finally, while Jefferies' base case scenario sets a $147 price target, its upside scenario has a $178 price target. The former assumes modest growths in AMD's core markets, while the latter factors in a 30% market share gain in high end personal computing, a 25% share gain in server and longer cycles for gaming consoles.

Mizuho reduced AMD's price target to $145, citing reduced multiples, but shared confidence in the company's earnings and guidance. For the full fiscal year of 2022, AMD expects to earn roughly $26 billion in revenue to mark 69% growth, and for the ongoing quarter, the company aims at bringing in $6.5 billion.

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Next in line is Susquehanna's Christopher Rolland, who joined the rest and set AMD's new price target at $140 alongside a Positive rating on the shares and praise for the company's earnings and performance in the server market.

AMD's announcement that it expected the total addressable market (TAM) for personal computing devices to drop didn't miss Christian Schwabb at Craig Hallum, who also cited decreased valuation multiples to drop the company's share price target to $130 from $160.

The lowest price target in the pack comes from Piper Sandler's Harsh Kumar, who has lowered it down to $98 from $130. Despite this, Kumar pointed out that AMD's success in selling higher priced chips for enterprise grade laptops is helping the company stem the bleeding from the PC market decline.

Explaining his firm's price target upgrade, the analyst outlined:

At a market price of $91.13, AMD trades at 20.9x our new calendar 2022 EPS estimate of $4.35. AMD trades at a discount compared to its peer group, which trades at 24.2x. Our new $98 price target ($130 previously) is based on a ~23x P/E of our new calendar 2022 EPS estimate. Our lower price target multiple (~32x previously) reflects the lower peer group multiple. We reiterate our Neutral rating.

AMD's Xilinx merger will contribute to the company's revenue growth this year, and even if the acquisition is ignored, the company managed to impressively grow its revenues in the quarter notes Kumar.

AMD's shares are trading higher over the past five days but have suffered year to date on the back of a broader market downturn. The personal computing market witnessed strong growth in the wake of the coronavirus pandemic, and as the world returns to normal, some of this growth is believed to be slowing down - compounding difficulties for companies that are already facing a chip shortage due to few players in the semiconductor manufacturing space.