Analyst updates AMD stock price target after fourth-quarter earnings

Rob Lenihan

Wed, Jan 31, 2024, 5:02 PM 4 min read

AMD delivers solid AI-driven growth

AMD earned 77 cents per share, an 11.5% increase from the same period in 2022 that matched Wall Street’s forecasts. Revenue rose 10.1% to $6.17 billion, just ahead of analysts' forecasts of $6.12 billion.

The company's new MI300X, a graphics-processing unit designed to support generative artificial intelligence technologies, was expected to produce around $3.5 billion in sales over the coming year as the group leverages its new launch against Nvidia's ability to meet the global surge in demand.

Chip sales are expected to rise to $3.5 billion. AMD said it sees first-quarter revenue in the region of $5.4 billion, plus or minus $300 million, with gross margins of around 52%.

CEO Lisa Su: AMD has 'multiple wins'

Su reminded analysts that “we closed multiple wins with large financial, energy, automotive, retail, technology and pharmaceutical companies, positioning us well for continued growth, based on expanded production deployments planned for 2024.”

Looking ahead, the company said in a statement that it expects its Data Center segment revenue to be flat, with a seasonal decline in server sales offset by a strong Data Center GPU ramp.

Client, embedded and gaming segment sales are expected to decline sequentially, AMD said, with semi-custom revenue expected to decline by a significant double-digit percentage."

For the most part, analysts reacted with cautious optimism to AMD's story.

Northland Capital's Gus Richard, who had recently downgraded AMD, upgraded the company to outperform, noting that the “risk of reset is over.”

Goldman Sachs analyst Toshiya Hari raised the firm's price target on AMD to $180 from $157 while keeping a buy rating on the shares.

Hari said that he expects significant weakness in AMD's Gaming business to drive negative revisions to Wall Street’s estimates.

However, the firm is encouraged by the company's ongoing customer traction in the data center GPU business as evidenced by the positive revision to management's full-year revenue guide from $2 billion prior to $3.5. billion.

Data center is what matters most for the shares given the segment's above-average growth potential and gross margin profile, Hari told investors in a research note.

Jefferies boosted its price target to $200 from $130 and kept a buy rating on the shares.

'AMD too conservative?'

The firm’s analysts said that fourth quarter earnings per share were in-line and the first quarter earnings outlooked missed by 12% on weakness across all segments except datacenter GPUs.

But Jefferies also noted the faster-than-expected ramp for its MI300 processors and said it is “incrementally more positive” on AMD's ability to penetrate the datacenter AI market following the report and earnings call.

More From Wall Street Analysts:

UBS lowered the firm's price target on AMD to $205 from $220 and kept a buy rating on the shares.

The company continues to experience moving parts that are masking strong momentum in AI and data center, UBS analysts said, but a reset in these other segments has run its course.

“AMD posted a very solid quarter and a good year, but not as good as last year,” said TheStreet's Real Money Pro Stephen Guilfoyle, adding that CEO Lisa Su is “one of the best in this or any business and I have complete faith in her.”

Guilfoyle said he had a $181 price target on the stock and had seen a case for $188, but not as of Wednesday morning. Shares were 2.6% to $167.66 at last check.

"Is AMD simply being conservative?" he asked. "Probably not in certain areas where Su sees declines. We all know that Intel (INTC) - Get Free Report has run into some trouble and AMD competes with Intel in the PC space."

Guilfoyle, who cut his teeth on the stock exchange in the 1980s, said AMD is "trying to compete with Nvidia (NVDA) - Get Free Report in the high-end, high-tech, and high-margin AI space" and he suggested that “there is a chance that overall, Su is being necessarily conservative.”