On Wednesday, Bernstein SocGen Group maintained its Market Perform rating on AMD (NASDAQ:AMD) with a consistent price target of $150.00. The firm noted that AMD's third-quarter results were respectable, slightly surpassing revenue forecasts with $6.819 billion against the expected $6.714 billion, while earnings per share (EPS) matched projections at $0.92.
The slight revenue beat was attributed mainly to the Client segment, with Data Center performing slightly above expectations, Embedded in line, and Gaming significantly underperforming.
AMD's Datacenter GPU sales were highlighted, exceeding $1.5 billion for the quarter. However, the outlook for the fourth quarter was less than anticipated, with projections of $7.5 billion in revenue and approximately $1.07 EPS, compared to the Street's expectations of $7.549 billion and $1.16 EPS.
The company anticipates Datacenter and Client segments to drive most of the sequential revenue growth, with estimates of Datacenter revenue around $4 billion and Client revenue around $2 billion, potentially disappointing and pleasing market watchers, respectively.
The company has also revised its 2024 Datacenter GPU forecast upward by $500 million to over $5 billion, a figure that analysts had likely already factored into their models. The gross margin outlook is anticipated to be around 54%, which is considered in line with expectations, while operating expenses are expected to be higher than the Street's forecasts.
Bernstein SocGen Group expressed concerns about AMD's performance in the AI sector, suggesting that it may not contribute to surpassing current market expectations. The firm also highlighted potential risks associated with the company's discussion of "lumpiness" in its business for 2025, PC market strength that contradicts current market trends, and increasing operating expenses.
There is an expectation that the overall business may experience seasonal declines in the first quarter, particularly in client, server CPU, gaming, and embedded segments.
In light of these observations, Bernstein SocGen Group has adjusted its estimates while maintaining the $150 price target, which is based on 30 times the average of fiscal years 2025 and 2026 EPS. The firm's stance reflects caution due to potential downward revisions of Street numbers and the current share price, which is considered high based on possibly optimistic earnings projections.
In other recent news, Advanced Micro Devices (NASDAQ:AMD) experienced a series of developments following its mixed third-quarter results and updated guidance. AMD's revenue surpassed expectations, boosted by strong sales of its MI300 products, market share gains from EPYC Turin processors, and increased Ryzen PC CPU demand. The firm raised its 2024 MI300 guidance to over $5.0 billion, up from the previous forecast of more than $4.5 billion.
Several analyst firms have updated their ratings and price targets for AMD. Truist Securities maintained a Hold rating with a $156 target, while Stifel reaffirmed a Buy rating with a $200 target. Goldman Sachs also maintained a Buy rating with a $175 target, and BofA Securities held steady with a Buy rating and a $180 target. Deutsche Bank maintained its Hold rating with a $150 target.
Despite some reservations, analysts generally acknowledged AMD's raised expectations for Datacenter GPU sales, indicating a confident stance in its growth potential within this segment. However, there is anticipation of increased competition in the x86 processor market, which could put pressure on AMD. In other developments, OpenAI announced a collaboration with Broadcom (NASDAQ:AVGO) Inc. and Taiwan Semiconductor Manufacturing Company (TSMC) to create its inaugural in-house artificial intelligence chip, incorporating AMD chips to satisfy its growing infrastructure needs.
InvestingPro Insights
To complement Bernstein SocGen Group's analysis, recent data from InvestingPro offers additional context on AMD's financial position and market performance. The company's market capitalization stands at an impressive $269.07 billion, reflecting its significant presence in the semiconductor industry. AMD's revenue for the last twelve months as of Q2 2024 reached $23.28 billion, with a notable revenue growth of 6.4% over the same period.
InvestingPro Tips highlight AMD's strong market performance, with a significant 72.85% return over the past year and a 20.09% return in the last three months. These figures align with the company's position as a prominent player in the Semiconductors & Semiconductor Equipment industry, as noted by InvestingPro.
However, investors should be aware that AMD is trading at a high P/E ratio of 198.13, which corresponds with Bernstein SocGen Group's caution regarding the current share price. This valuation metric suggests that the market has high growth expectations for AMD, particularly in the AI sector, which the analysts have expressed some reservations about.
For readers seeking a more comprehensive analysis, InvestingPro offers 16 additional tips on AMD, providing a broader perspective on the company's financial health and market position.
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