Northland cuts AMD stock price target to $132 from $175

On Wednesday, Northland analyst Gus Richard adjusted the price target for AMD (NASDAQ:AMD) stock, bringing it down to $132 from the previous $175, while maintaining an Outperform rating on the shares. According to InvestingPro data, AMD currently trades at $98.62, with analyst targets ranging from $75 to $200. The stock appears undervalued based on InvestingPro’s Fair Value analysis, despite trading at a relatively high P/E ratio of 98.38. The adjustment follows AMD’s quarterly financial report, which revealed earnings of $0.96 per share on revenue of $7.44 billion, surpassing both Northland’s estimate of $0.94 per share on $7.2 billion and the consensus by two cents. Revenue exceeded the upper end of the guidance range provided by AMD.

The company’s non-GAAP gross margin was reported at 53.7%, slightly above Northland’s projection of 53.3%, though it showed a sequential decrease of 40 basis points. Operating expenses were higher than expected, totaling $2.21 billion, which was $50 million above Northland’s model. By the quarter’s conclusion, AMD’s cash reserves had increased by $2.2 billion quarter-over-quarter, reaching $7.31 billion. InvestingPro analysis shows AMD maintains strong financial health with a current ratio of 2.62 and operates with moderate debt levels. For deeper insights into AMD’s financial health metrics and 14 key ProTips, consider exploring InvestingPro’s comprehensive research report.

AMD’s recent financial activities included the issuance of $1.5 billion in debt to finance the acquisition of ZT Systems and the repurchase of $749 million worth of its own stock. The company’s free cash flow (FCF) was substantial at $727 million, even though cash from operations was a modest $39 million. Accounts receivable fell by $749 million quarter-over-quarter, with days sales outstanding (DSO) decreasing to 67 days. Inventory levels rose to $6.4 billion, as the company prepared for client and server product ramps, increasing the days of inventory to 156.

In the Data Center segment, AMD’s revenue reached $3.7 billion, outperforming Northland’s estimate of $3.6 billion. As a prominent player in the Semiconductors industry, AMD has demonstrated impressive revenue growth of 13.69% over the last twelve months, according to InvestingPro data, with total revenue reaching $25.79 billion. This was attributed to strong non-AI sales, which were estimated at $1.97 billion. AI revenue for the quarter was estimated at $1.7 billion, a 9% decrease from the previous quarter, affected by export restrictions impacting sales by approximately $1.5 billion. Northland has adjusted its full-year AI revenue forecast for AMD to $8.1 billion, down from the previously projected $9.3 billion.

The Client and Gaming sector reported revenue of $2.9 billion, exceeding Northland’s estimate of $2.74 billion. Client revenue saw a slight 1% decline quarter-over-quarter, which was better than AMD’s anticipated seasonal downturn of 8-10%. This performance was largely driven by increased client CPU average selling prices (ASPs) as AMD continues to penetrate the enterprise market and gain share in the gaming sector. AMD anticipates double-digit quarter-over-quarter growth in client revenue for the second quarter and expects growth to moderate in the second half of 2025.

Gaming revenue stood at $647 million, against the $591 million projected by Northland, signaling a stabilization in the business and the clearing of excess game console inventory. Northland is forecasting a slight increase in gaming revenue for the full year. With a market capitalization of $159.4 billion and analysts projecting EPS of $4.54 for FY2025, AMD continues to show strong growth potential. Get access to detailed valuation metrics and comprehensive analysis through InvestingPro’s research reports, covering over 1,400 top US stocks.

In other recent news, Advanced Micro Devices, Inc. (AMD) reported strong financial results for the March quarter, with revenues of $7.4 billion and an adjusted EPS of $0.96, surpassing consensus estimates. The company’s adjusted gross margin was 54%, meeting market expectations. Looking ahead, AMD has projected second-quarter revenues to reach a midpoint of $7.4 billion, with a notable impact from China-based MI308 revenues. Stifel analysts maintained a Buy rating with a $132 price target, expressing confidence in AMD’s growth potential in high-growth areas like AI. Meanwhile, Evercore ISI reiterated an Outperform rating and a $126 price target, highlighting the anticipated expansion of AMD’s Data Center GPU business. KeyBanc Capital Markets maintained a Sector Weight rating, noting AMD’s robust first-quarter results despite potential revenue impacts from the China AI chip ban. Jefferies, however, lowered its price target to $100 while maintaining a Hold rating, citing concerns about AMD’s AI growth metrics. Bernstein analysts also maintained a Market Perform rating with a $95 price target, expressing mixed sentiments about AMD’s financial performance and market dynamics.

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