Advanced Micro Devices (AMD) might be ailing on Wednesday, but bullish analysts and investors haven't given up on the name yet.
Shares traded down nearly 8% at mid-day on Wednesday, marking their biggest decline since Apple's (AAPL) surprise shareholder letter sent the sector slumping in January. But the segments to blame and the catalysts still ahead are keeping many long-term bulls on board.
"We believe consoles and China are entirely responsible for 2H downside," Cowen analyst Matthew Ramsay said, adding that Cowen still remains "confident in sustainable growth/margin expansion with a line of sight" toward $2 or more in earnings per share in 2021.
"Reiterate Outperform, $40 price target and Top Pick ahead of next week's Rome launch," Ramsay said.
AMD also stands to gain from its new next-generation processors Rome, Ryzen and Navi, all in the midst of their ramps, added Ramsey.
He added that investors should "ignore the noise" around gaming and focus on growth segments in computing and the company's ability to continue to gain ground on Intel (INTC) in CPU and Nvidia (NVDA) in GPU with its upcoming releases that could curry favor with cloud kings. The company is also aided by an expanded relationship with Taiwan Semiconductor (TSM) .
"We acknowledge there is lots of work left to do in both PC branding and DC SW development, but we believe share gains from these products and a recovery in the GPU market are poised to drive a material inflection in revenue, GM and EPS starting in 3Q19," he concluded.
On navigating trade issues, much of the trust must be placed in management headed by CEO Lisa Su, who many investors have undying faith in.
"Last night's guide down in terms of Q3 revenue, albeit on higher margin, provides the opportunity hoped for, if you, like me, trust Advanced Micro Devices CEO Lisa Su to be the best in this business," Stephen "Sarge" Guilfoyle noted in his column Wednesday morning. "My current price target for AMD is $37, and the name has been a performer for me."
He advised dipping back into the name around $31 per share, a level within striking distance at current declines.
For more cautious investors, it may be best to wait until the stock does indeed break that level after such a strong run year to date.
"Although AMD has improved its competitiveness across CPU and GPU products with Ryzen, EPYC and Radeon Vega platforms and is on track to improve its market share and drive meaningful revenue growth in the near-term, we believe long-term share gains are less certain," J.P. Morgan analyst Harlan Sur warned as the stock trended in the mid-$30 range. "While we are encouraged by AMD's execution, we remain Neutral as shares appear to be fully valued."
In the end, it may be best to wait for details from its Aug. 7 release of new products pans out, but for those currently holding shares amidst a still intact model, there's still time.
For what the charts are telling more speculative traders amidst the nose, click here.
Apple and Nvidia are holdings in Jim Cramer's Action Alerts PLUS member club.
