Analysts at Erste Group downgraded shares of AMD (NASDAQ:AMD) to Hold from Buy in a note Friday, highlighting the company's valuation as a factor influencing its more neutral view on the stock.
Erste noted that AMD reported full-year 2023 revenue of $22.7 billion, representing a -3.9% decline year-on-year. in addition, AMD achieved record sales of AMD Instinct GPUs and EPYC CPUs and higher sales of AMD Ryzen processors. Revenue in the gaming segment amounted to $6.2 billion, a decline of -9% year-on-year, while the cost of goods sold decreased by -6% year-on-year.
"AMD's CPUs are very competitive compared to Intel," said analysts at Erste. "AMD has made great progress in achieving important hardware and software milestones to meet growing customer demand for AI solutions for data centers."
However, the firm feels the valuation of AMD's shares according to the P/E ratio for 2024e is "significantly higher than the P/E ratio of the peer group, also in relation to the much stronger competitor NVIDIA."
"The share's upside potential, therefore, appears limited at present," added the investment firm.