Wells Fargo analyst Aaron Rakers sees a compelling risk-reward in Advanced Micro Devices Inc (NASDAQ:AMD) stock as shares trade nearly 40% lower year-to-end and near the 10-month low.
The recent underperformance in AMD shares, coupled with Rakers’ projection that the ongoing data center momentum should offset tempering PC expectations, makes the analyst positive on stock at current levels.
“AMD's valuation multiples now represent the lowest premium vs. the SOX and INTC that we have seen over the past 5-yrs - now trading at a ~21x 2023 P/E vs. ~33x 5-yr. median NTM P/E (see charts). We expect AMD to reiterate +31% 2022 organic (ex-XLNX) rev. growth outlook,” Rakers wrote in a client note.
Rakers says that the PC weakness is already discounted by investors.
“We think investor sentiment has adequately digested an expectation that PC shipments would decline in the mid-single-digit y/y range in 2022; AMD's ability to gain commercial share and high-end consumer/gaming mix are key considerations.”
Still, the analyst cut the price target to $140.00 per share from $180.00 amid incremental macro concerns.
AMD stock price is down half a percent in pre-open Friday.
By Senad Karaahmetovic