On Wednesday, Piper Sandler adjusted the price target for shares of AMD (NASDAQ:AMD), bringing it down to $180 from the previous $200, while still maintaining an Overweight rating on the stock. The revision followed AMD's financial results, which revealed a slight outperformance in the September quarter revenue against street consensus and matched expectations for the December guidance.
AMD's recent earnings call brought to light that the company anticipates GPU revenues to surpass $5 billion in 2024, a figure that has been a significant marker for investors. The management highlighted that customer engagement with AMD's accelerator platform is high, with most clients showing openness to collaboration.
The company's GPU segment, alongside its client and server operations, is expected to excel, although the gaming and embedded sectors may face challenges. Gaming is impacted by product end-of-life cycles, while the embedded segment is experiencing a gradual recovery.
AMD's ongoing efforts to expand its presence in the core data center market were also noted. The acquisition of ZT Systems is projected to enhance AMD's offerings in the AI accelerator market beginning next year, which could be a strategic move for the company in strengthening its market position.
Piper Sandler reaffirmed an Overweight rating on AMD's stock, indicating a positive outlook despite the reduction in the price target to $180. This adjustment reflects the firm's continued confidence in AMD's growth trajectory, especially in the data center and AI accelerator segments.
In other recent news, Advanced Micro Devices (NASDAQ:AMD) reported third-quarter results slightly exceeding revenue forecasts, with earnings per share aligning with projections. The company's revenue was propelled by robust sales of its MI300 products, increased market share from EPYC Turin processors, and heightened Ryzen PC CPU demand. However, AMD's fourth-quarter outlook fell short of expectations, projecting $7.5 billion in revenue and approximately $1.07 earnings per share.
AMD also revised its 2024 MI300 guidance upwards to over $5.0 billion, an increase from the previous forecast of more than $4.5 billion. Amid these updates, OpenAI announced a collaboration with Broadcom (NASDAQ:AVGO) Inc. and Taiwan Semiconductor Manufacturing Company to create its inaugural in-house artificial intelligence chip, incorporating AMD chips to meet its growing infrastructure needs.
Analysts' reactions to these developments vary. Baird reiterated an Outperform rating with a $175.00 price target, anticipating a substantial increase in AMD's Artificial Intelligence (AI) revenue by 2025. Northland maintained an Outperform rating with a $175.00 price target, expecting AMD to close the performance gap with NVIDIA (NASDAQ:NVDA).
Bernstein SocGen Group and Truist Securities maintained their Market Perform and Hold ratings respectively, citing potential concerns in the AI sector and anticipated competition in the processor market. Stifel also maintained a Buy rating, with a $200 target, pointing to AMD's robust sales in AI compute.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on AMD's financial position and market performance, complementing Piper Sandler's analysis. As of the last twelve months ending Q2 2024, AMD reported a revenue of $23.28 billion, with a notable revenue growth of 6.4%. This aligns with the company's positive performance mentioned in the article, particularly in its GPU, client, and server operations.
InvestingPro Tips highlight AMD's significant return over the last week, with a 1-week price total return of 8.72%. This recent uptick could be attributed to investor optimism following the earnings call and the company's strong outlook for GPU revenues in 2024. Additionally, AMD's high return over the last year, with a 1-year price total return of 72.85%, underscores the company's robust performance in the semiconductor market.
It's worth noting that AMD is trading at a high earnings multiple, with a P/E ratio of 198.13. This valuation suggests that investors have high growth expectations for the company, likely influenced by its expanding presence in the AI accelerator market and the anticipated boost from the ZT Systems acquisition.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for AMD, providing a deeper understanding of the company's financial health and market position.
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