Wall Street Climbs Aboard the Advanced Micro Devices Train

Advanced Micro Devices (NASDAQ: AMD) had a good week on the stock market last week after it rose nearly 6%. Something shifted in a big way in that time: sentiment. At least two analysts changed their negative views on AMD, recognizing their error in under-estimating the chip maker’s quarterly results. The positive sentiment could continue lifting AMD stock.

Susquehanna upgraded AMD stock to a "hold" and assigned an $11 price target. The downside valuation is still misaligned but when the average price target is $15 and the $20 price target from Robert W. Baird’s analyst is considered, the call is too conservative.

AMD’s stock is not cheap, so value investors cannot cite the forward P/E of over 20 times as a reason to believe in the upside. Yet the product refresh cycle in graphics cards and CPUs is in the early phases. Ryzen’s release last year introduced the brand and potential of CPUs to the computing market. In its second iteration, Ryzen 2, which is manufactured at a smaller dye, could win over customers who waited for the first refresh.

In the server space, AMD secured contracts from Cray Computer (NASDAQ: CRAY) and HP Enterprise (NYSE: HPE) in powering servers with the EPYC chip.

Finally, the HEDT market will welcome AMD’s Threadripper 2, which costs less, runs faster and offers better price/performance than Intel’s i9 processor.