Advanced Micro Devices Inc.'s earnings could… To make “expensive stocks more expensive,” in the view of Bernstein analyst Stacy Rasgon.
While the chip company boosted its annual revenue forecast for its AI-enabled MI300X data center GPUs, upbeat estimates have emerged for business so important that AMD subsidiary AMD,
Expectations of more than $3.5 billion in such revenues seemed like a disappointment.
See more: AMD's AI revenue forecasts got a massive boost — but it looks like it's not enough, with inventory falling
But at the same time, he noted that “optimistic forecasts” for revenues of up to $8 billion from GPUs in data centers “are likely to be a long way off at least into 2024, although the overall evidence is not inconsistent with what we've seen from… Intel indicates that this year's numbers will need to decline again.
The crucial question for investors concerns the size of Nvidia's MI300X business, and “for now at least, the answer is probably 'not big enough,'” Rasgon wrote, as he maintained his market performance stance on AMD shares but raised his price target to 140. $ from $120.
He described the stock as “the most expensive AI stock by a wide margin,” noting its price multiple of 44.6 times forward earnings per share. This compares to 36.7x for Marvell Technology Inc. shares. MRVL,
31.9x for Intel Corp. shares. INTC,
31.7x for Nvidia Corp. shares. NVDA,
And 25.8x for Broadcom Inc. shares. AVGO,
is reading: Why Marvell dethroned Nvidia as Citi's top chip pick
AMD stock fell 6% in premarket action on Wednesday.
Others view the latest report more positively. Cantor Fitzgerald's CJ Muse sought to put MI300 forecasts into context.
While the $3.5 billion forecast “will likely be viewed by the Street as a disappointment,” AMD's management team said, “but if you take a step back, it's fairly clear that management” faced an impossible task with the buy-side. [data-center] AI GPU forecasts have recently increased to $6.0 billion or more.
He added: “Any rational investor knows that the company is not going there today,” but he does not see “any change.” [his] Another thesis, perhaps, other than the growing weakness in non-AI-related companies.
Muse rates the stock Overweight with a price target of $190.
TD Cowen's Matthew Ramsay added that AMD faced “undoubtedly a significant hurdle” but “delivered where it mattered” in terms of bringing “materials upside and sustained MI300 momentum.”
“We were particularly impressed with how quickly AMD and its customers developed/fine-tuned the software for them [large-language-model] “Inferential deployments for this thriving franchise that will likely be AMD's fastest ramp ever,” he continued.
While he acknowledged that challenges in the company's gaming business were worse than feared, he maintained his outperform rating and price target of $185 per share.
Meanwhile, Bird's Tristan Gera said it was “too early to take profits.”
“Although 2024 is somewhat of a transitional year with a sharp but early decline in AI partially offset by gaming and embedded tools, putting pressure on us.” [earnings per share] Estimating for 2024, our 2025 EPS forecast is higher driven by a lower AI market share assumption. “AMD has raised its AI revenue guidance for 2024 and we are modeling AI to exit 2025 at 35% of total revenue.”
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He said the company could generate more than $7 in earnings per share by 2026, adding that “there is significant upside potential for the stock,” which he rates as an outperformer. Gerra raised his price target on AMD shares to $200 from $125 after Tuesday's report.
