Advanced Micro Devices (AMD) is the latest semiconductor stock to release its fourth-quarter earnings.
AMD – Daily Chart
AMD is hovering at an all-time high, and earnings will be critical for the rally. Support starts at $164.30.
AMD will release its earnings after the US market closes on Tuesday, allowing traders to study the early analyst sentiment before the US opens again on Wednesday.
Raymond James analyst Srini Pajjuri is still bullish on the stock but has downgraded his rating on it to outperform from a strong buy. Pajjuri said that “elevated AI revenue expectations” were a problem for many companies.
In his latest research, the analyst raised his price target to $195 from $190, with a further 10% upside from current levels.
Pajjuri said that AMD has announced three big cloud customers for its artificial intelligence graphics processing units: Microsoft, Meta Platforms, and Oracle. He calculates that rival Nvidia shipped about 900,000 to that group during 2023. Meanwhile, Wall Street expectations imply that AMD will ship 250,000 to 500,000 units this year, which would mean a 15% to 25% unit market share.
“We are in no way suggesting that AMD has only 3 cloud/hyperscale customers but believe that a vast majority of AMD’s 2024 shipments are likely going to MSFT and META,” he said. “Such a rapid share gain is less common in data centres and could also attract more aggressive competitive reactions from NVDA.”
Additionally, he added that AMD’s stock valuation could lower as revenue growth accelerates due to the uptake of its MI300 AI accelerator. However, many tech stocks are priced for further development at solid valuations.
“We project AMD’s base business to earn $3.50 to $4 a share in 2025, and AI GPUs will need to contribute around $3 of EPS,” the analyst said, around $12 billion in revenue or 800,000 units. Nvidia shipped around 2 million units in 2023 and is still the dominant market player.
