shares now offer a great buying opportunity even if the economy falls into a recession, according to Northland Capital Markets.
On Thursday, analyst Gus Richard raised his rating for
Advanced Micro Devices
stock (ticker: AMD) to Outperform from Market Perform, though he reduced his target for the price to $95 from $97. AMD shares fell 1% to $77.19 on Thursday.“We believe that the world is heading into a global recession, and in general, semiconductor companies’ estimates are too high,” he wrote. “We scrubbed our AMD numbers and lower our CY23 estimates to comprehend a global economic slowdown … AMD in servers CPUs is at the top of the stack next year we believe AMD will see little impact on this business.”
AMD makes processors that act as the main computing brains for personal computers, servers, and graphics cards.
The corporate server and cloud-computing chip business is especially lucrative due to its higher price points and profit margins. AMD should benefit from Intel’s (
) admission earlier this month that production of its next-generation server processor would ramp up later than planned because the product needed more testing.
The analyst also noted that AMD stock is now trading at just 16 times the per-share earnings he expects for 2023, down from 32 times at the beginning of this year. “We believe macro headwinds are now in our estimates and the share price,” Richard wrote.The stock has been battered as investors have responded to a weakening market for PCs and a slowing global economy. The shares are down about 45% this year, compared with a 35% drop for the
iShares Semiconductor ETF
(SOXX), which tracks the performance of the ICE Semiconductor Index.But if Northland Capital Markets is correct in its upbeat call on AMD’s server-chip business, the company’s shares may be a bargain at these levels.
Write to Tae Kim at [email protected]