AMD has tumbled into a bear market — here’s why analysts say it’s time to buy (AMD)
- AMD stock has tumbled into a bear market, sliding 25% from its recent high set on September 14.
- Shares came under pressure after rival Intel reportedly solved its 10 nanometer-chip shortage saga, and amid a huge sell-off in the tech space.
- AMD will have a big year in 2019 after rolling out its 7nm chips, and it’s time to buy the dip, RBC says.
- The chipmaker reports its third-quarter results after Wednesday’s closing bell.
- Watch AMD trade live here.
AMD’s stock has tumbled into a bear market since hitting its mid-September peak, and some Wall Street analysts are saying it’s time to buy the dip before the chipmaker launches its new-generation chip.
Shares were on fire to start the year, surging more than 230% by the middle of September as rival Intel was contending with a production delay for its 10-nanometer chips. But they came under pressure entering October after a research report said Intel may cure its production problem sooner than expected and as a brutal stock-market sell-off ravaged the tech sector. AMD’s stock is down more than 25% from its recent high set on September 14.
And although investors have been fleeing the stock, some analysts on Wall Street are saying now is the time to take advantage of shares being on sale.
“We would add to positions on weakness and wait for 2019,” Mitch Steves, an RBC analyst, wrote in a note sent out to clients on Tuesday.
“While solid or poor results should certainly move the stock, we think the bigger story is the first quarter of 2019 when 7 nano-meter chips are released.”
According to Steves, two items have been adding market volatility in the semiconductor space, Intel’s recent CPU shortage and chipmakers no longer selling GPUs in the cryptocurrency market. And while the two items are topical for the quarter starting in September, Steves thinks the bigger story surrounds servers and their ability to gain market share.
Steves says there is not much to expect heading into the holiday season as Intel will maintain its PC market share by shipping 14 nm chips into the low-end market. He thinks that as long as AMD rolls out its 7nm chips, it will “gain notable share in servers and potentially mid-high-end PCs.”
Steves has an “outperform” rating and a price target of $40 for AMD — 68% where shares are currently trading.
And Jefferies analyst Mark Lipacis is bullish about AMD, saying the company will report positive gross margin and earnings-per-share surprises — due to Intel’s capacity constraints.
“With the combination of its capacity constraints and delay of its 10nm manufacturing process, Intel has opened the door for AMD to gain share in both servers and PCs – near and long term,” Lipacis said.
“We think AMD has near-term server CPU traction at hyperscale companies and at least one original equipment manufacturer.”
AMD is set to report its third-quarter results after Wednesday’s closing bell. Analysts surveyed by Bloomberg are expecting earnings of $0.12 a share on revenue of $1.70 billion.
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