UPDATE: AMD (AMD) PT Lowered to $115 at Susquehanna Citing PC Market Risks
Susquehanna analyst Christopher Rolland lowered the price target on AMD (NASDAQ: AMD) to $115.00 (from $120.00) while maintaining a Positive rating.
The analyst comments "On Tuesday, August 2, AMD will report its 2Q22 earnings. Despite Intel’s challenged print, we think AMD will fare much better, but PC may not be immune. While AMD reiterated their 2022 guidance at their Analyst Day, we believe the outlook (particularly for PC) may have weakened since. While AMD PC may show signs of weakness at the edges, we expect a different narrative for AMD server. We note this is the first quarter AMD will report under its new business segments (Client, Data Center, Gaming, Embedded), and the second quarter with Xilinx included. For 2Q PC, IDC/ODM/Intel numbers were down -11%/-14%/-17.5% QOQ versus 2Q AMD C&G Street expectations of down -3%. We therefore expect 2Q inline, to perhaps a small miss for Client. For 3Q, we note potentially larger risks, but nothing similar to the magnitude of Intel’s large miss. Perhaps this difference can be bridged through our PC-SIGnals and channel work that suggests AMD gained modest share in both desktops and laptops in 2Q, despite aggressive Alder Lake pricing. For Graphics/Gaming, we note aftermarket GPU pricing continued to collapse in 2Q, with AMD cards selling at a +30% premium to MSRP, down -12% QOQ. However, AMD cards regained some GPU model share from NVDA in the quarter. Additionally, we believe that AMD shifted wafers to PC/Server and has been under-shipping GPU for some time. While 3Q risks remains, we believe they are less than NVIDIA. For Data Center, we expect AMD to fare OK, and distinctly different than the dour results Intel’s DC would suggest. Management reaffirmed a 4Q22 launch for Genoa at their Analyst Day, which will be ahead of Sapphire Rapids, and should support longerterm trends here (server share going from ~15% to >20%?). While we worry capex from hyperscalers may be coming down (e.g., ad-related spending), share gains for AMD should help mitigate headwinds. For Xilinx, we note extended lead-times in the 70-weeks range (our SemiSIGnals LT chart on p.4). As AMD uses their scale to receive more wafers and substrate, we believe Xilinx can serve as a ballast for revenue/margins, offsetting potential PC/Gaming headwinds. In terms of the setup, AMD’s stock has outperformed the SOX since last print by +300 bps, perhaps modestly raising the bar for expectations. We reiterate Positive, but lower our PT from $120 to $115 (~28.5x 2022E EV/NOPAT) given rising risks around the PC market."