By Senad Karaahmetovic
Shares of Advanced Micro Devices Inc (NASDAQ:AMD) are up over 1% in premarket Thursday after BMO analyst Ambrish Srivastava upgraded to Outperform from Market Perform.
The analyst also hiked the price target to $115 from $100, implying an upside potential of nearly 50%. However, the 2022 and 2023 estimates are cut to reflect near-term headwinds.
“We do not see AMD's non-PC businesses offsetting the growing drag from the PC market,” Srivastava told clients in a note.
Still, the analyst remains long-term bullish on the fundamentals and the company’s earnings power.
First, Srivastava sees a path to sustained share gains against Intel (NASDAQ:INTC).
“We do not need Intel to mis-execute for the thesis to work. Our sense is that with the several key architectural innovations the company has made, along with rolling out a lineup of products that has enabled the company to not only close the gap but get ahead in many cases, AMD's credibility with customers has continued to climb. This should enable AMD to gain a larger share of the wallet, especially on the faster growing cloud data center TAM.”
Moreover, the analyst is positive on valuation after a major selloff in AMD stock YTD. As a result, Srivastava sees a “favorable” valuation and an “attractive risk/reward profile.”
“We see AMD generating over $9B in FCF by 2025 and more importantly grow its FCF/share by a CAGR of over 20% (2021-2025),” the analyst concluded.