Street Calls of the Week
Investing.com - Erste Group has downgraded Advanced Micro Devices (NASDAQ:AMD) from Buy to Hold, citing concerns about the company’s operating margins and valuation. The stock, currently trading at a P/E ratio of 94x and showing a gross profit margin of 51%, appears slightly overvalued according to InvestingPro analysis.
The research firm noted that while AMD anticipates further growth in 2025 based on increasing demand for high-performance CPUs and GPUs in data center environments, its operating margin in recent quarters has been lower than the sector average. Despite these concerns, AMD has demonstrated strong revenue growth of 27% year-over-year, and 18 analysts have recently revised their earnings expectations upward.
Erste Group analyst Hans Engel pointed out that AMD’s EBIT margin was "even slightly negative in the last quarter," raising concerns about the company’s profitability despite its growth prospects.
The downgrade also highlighted AMD’s "below-average return on equity" as a factor in the rating change, suggesting fundamental performance issues beyond just quarterly margin pressure.
Given these financial metrics, Erste Group concluded that AMD’s current price-to-earnings ratio appears high, justifying the shift from a Buy to a Hold recommendation.
In other recent news, Advanced Micro Devices (AMD) has entered into a partnership with IBM to develop next-generation quantum-centric supercomputing architectures. This collaboration seeks to integrate AMD’s high-performance computing technologies with IBM’s quantum computers, aiming to tackle complex problems with a hybrid computing approach. Meanwhile, Seaport Global Securities has downgraded AMD’s stock rating from Buy to Neutral, expressing concerns about the company’s AI accelerator business and its ability to grow orders from headline customers. On the other hand, Truist Securities maintains a Buy rating with a $213 price target, noting a positive shift in customer perception of AMD in the datacenter and AI markets. HSBC has also maintained a Buy rating but lowered its price target to $185, citing revised assumptions about the average selling price of AMD’s MI355 chip. These developments reflect a mixed sentiment among analysts regarding AMD’s market position and future prospects.
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