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On Thursday, Morgan Stanley released a note to its clients in which it admitted its previously cautious outlook on Advanced Micro Devices (NASDAQ:AMD) stock had been the “wrong call.” The firm upgraded AMD stock to “equal weight.”
The impact of this upgrade on AMD stock price was immediate. AMD stock began to surge and didn’t stop until it had hit $31.82 for a 7.86% gain on the day. The halo effect is apparently not over yet, as AMD stock price tacked on nearly 2% on Friday.
Source: AMD
Morgan Stanley Changes Course, AMD Stock Posts Big Gain
Morgan Stanley has been bearish on Advanced Micro Devices stock for several years. Its analysts weren’t convinced that the company’s Ryzen processors could take and sustain meaningful market share from Intel (NASDAQ:INTC).
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Even more concerning was the big boost AMD’s graphics card sales were getting from cryptocurrency miners, a huge source of revenue that analysts felt could drop dramatically. Also factored in were declining sales of video-game consoles, which has also negatively affected AMD’s revenue.
When Morgan Stanley downgraded Advanced Micro Devices stock to “underweight” in October 2017, the market’s reaction was swift and harsh, resulting in AMD stock price tanking. Advanced Micro Devices stock lost 25% of its value within a week of the call.
Last week, Morgan Stanley’s analysts reversed course. Noting that “underweight” had been the “wrong call” on AMD stock, the firm , in a note to investors, raised AMD stock to “equal weight,” hiking its target price for Advanced Micro Devices stock from $17 to $28. The firm wrote:
“While our earnings concerns over the last 12 months have played out … the table is set well for 2020 and there are positive near-term catalysts.”
Many Things Are Going Right for AMD
Advanced Micro Devices has been hit by some negative trends, but they have impacted its competitors just as badly. Nvidia (NASDAQ:NVDA) is also feeling the sting of the crypto mining collapse. And pretty much all American tech companies are feeling the effects of the escalating trade war with China.
But AMD stock has had a lot of positive catalysts, and its series of wins has been impactful enough to finally convince Morgan Stanley that it had made an error.
Among the positives for Advanced Micro Devices stock are the continued success of its Ryzen computer processors. The newly announced third-generation Ryzen lineup includes a flagship chip that outperforms Intel’s best and costs 50% less.