After Advanced Micro Devices Inc. capitalized on the mistakes of Intel Corp. in 2020, billions of dollars depend on the company continuing on this path while its biggest rival tries to straighten up.
Gelsinger’s arrival is seen as a much-needed infusion of talent to better combat companies like AMD CEO Lisa Su, who over the past six years has turned the chip maker in Santa Clara, California, into a formidable rival to Intel after years of being a sad Silicon Valley half sister. AMD ran over Intel in July, when Intel said it would have to delay its next-generation 7-nanometer chips until 2023 because of manufacturing problems, the same chip architecture that AMD first launched in late 2019.
In the last 12 months alone, AMD shares have risen by almost 80%, while Intel shares have fallen by almost 10%, compared to a 60% increase in the PHLX SOX semiconductor index,
AMD’s shares doubled in 2020, after being the biggest winner on the S&P 500 index in 2018 and 2019, pushing AMD’s market capitalization to more than $ 100 billion.
In addition: AMD will buy Xilinx for $ 35 billion in shares
BMO Capital Markets analyst Ambrish Srivastava, who recently downgraded AMD’s rating to underperforming and lowered its target price to $ 75, said he expects Intel’s change of guard to weigh AMD’s stock price.
“We believe that much of the appreciation of the rich can also be attributed to Intel’s poor performance,” said Srivastava. “Which, in turn, opened up a ‘blue sky’ scenario for how much stake AMD could gain compared to Intel leading to further appreciation.
What to expect
Earnings: Of the 34 analysts interviewed by FactSet, AMD on average is expected to post adjusted earnings of 47 cents per share, up from the 39 cents per share expected at the beginning of the quarter and 32 cents per share reported in the previous year. Estimize, a software platform that collects estimates from hedge fund executives, brokers, buying analysts and others, requires earnings of 50 cents per share.
Recipe: In November, AMD forecast fourth-quarter sales of $ 2.9 billion to $ 3.1 billion, while analysts, on average, predicted revenue of $ 2.6 billion at the time. Now, 30 analysts, on average, expect revenue of $ 3.02 billion, up from the $ 2.13 billion reported in the same quarter last year. Estimize expects revenue of $ 3.08 billion.
Stock movement: In the fourth quarter, AMD’s shares rose 12%. In comparison, the SOX index rose 25%, the S&P 500 SPX index,
gained 12%, and the Nasdaq Composite index, heavy on technology,
rose 15%.
What analysts are saying
Cowen analyst Matthew Ramsay, who has a higher performance rating, said he expects AMD’s earnings and product roadmaps to remain less volatile compared to Intel’s next year.
“In the next 2+ years, we see little competitive or fundamental change from AMD’s perspective,” said Ramsay. “The road maps are defined.”
“While the renewed focus and clarity around Intel’s internal priorities and roadmaps can earn some customer loyalty and help a little to decrease their loss of stake in the meantime, if Intel succeeds in fixing its 7 nm roadmap, first products are likely to be in scale by 2023, ”said the Cowen analyst.
B of A Securities analyst Vivek Arya, who has an AMD purchase rating, said that while the company announced new lines of gaming notebooks and “Milan” data center chips at CES earlier this month, they were observed omissions. Arya said investors are concerned about “the lack of details about Milan without the disclosure of new server clients” and “focus on games, not commercial notebooks, where AMD is most challenged”. Also at CES, rival Nvidia Corp. NVDA,
announced a new line of gaming laptops.
Benchmark analyst Ruben Roy, who has a retention rating, said he expects the wind in favor to lift both AMD business segments.
“We are updating our 2021 revenue and EPS estimates to reflect modestly higher revenue from the Computer and Graphics segment, given the continued strength in the PC market and higher semi-personalized revenue, given the continued strength of recent game console launches” said Roy.
Analysts, on average, expect $ 1.77 billion in AMD computer and graphics sales and $ 1.23 billion in corporate, embedded and semi-personalized sales, the segment that contains data center chips and game consoles.
Of the 35 analysts covering AMD, 20 have buy or overweight ratings, 12 have retention ratings and three have sales ratings, with an average target price of $ 95.30.