Shares of Advanced Micro Devices (AMD) opened more than 5% lower Thursday—eventually slipping more than 9% in early morning trading—following the release of a key analyst note.
Today’s Warning
Analyst Toshiya Hari of Goldman Sachs initiated coverage on AMD with a “sell” rating and a 12-month price target of $11, which would represent a 22% slide from Wednesday’s closing price.
Although Hari credited the company for improving its execution of strategic initiatives under CEO Lisa Su, the analyst cited concerns that the stock has already priced in improvements in its competitive position. Hari also warned that AMD’s primary competitors, Intel (INTC - Free Report) and NVIDIA (NVDA - Free Report) , would likely fight back if the company did steal some market share.
“If AMD were to gain meaningful traction with its new products (e.g. Ryzen CPU, Naples CPU, Vega GPU) in 2017, we believe Intel and Nvidia would be likely to fight back in late-2017 and/or 2018 in the form of pricing concessions,” he said.
AMD has been a darling stock for the past year or so, gaining more than 400% over the last 52 weeks. Nevertheless, Hari expects AMD to underperform the market after its investor day in May.
Project Scorpio
The analyst’s warning comes on the same day that Microsoft (MSFT - Free Report) revealed the technology inside its next Xbox system, codenamed “Project Scorpio.” Integral to the new console will be Microsoft’s new Scorpio Engine, a “system-on-chip” that was designed alongside AMD.
There were some rumors that Project Scorpio would feature AMD’s new Ryzen CPU technology, but that doesn’t seem to be the case. Last month, shares of slid after an unfavorable review of the Ryzen 7’s PC gaming performance.
Bottom Line
AMD remains a Zacks Rank #2 (Buy). The company has seen positive earnings estimate revisions, and our current consensus estimates suggest that this will be a year of impressive EPS and sales growth. While short-term volatility is always a possibility, there is plenty of strength here.
Which Stocks are Zacks Experts Talking About?
Stocks in today's headlines may be tempting buys, but how would you like a sneak peek at the stocks Zacks experts recommend? Starting today, for the next month, you can follow all of Zacks' private buys and sells in real time. You can track value and momentum stocks, ETFs, stocks under $10, options moves, insider trades, and stocks set to report positive earnings surprises (we've called them with 80%+ accuracy). Click here for all Zacks trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Shares of Advanced Micro Devices (AMD) opened more than 5% lower Thursday—eventually slipping more than 9% in early morning trading—following the release of a key analyst note.
Today’s Warning
Analyst Toshiya Hari of Goldman Sachs initiated coverage on AMD with a “sell” rating and a 12-month price target of $11, which would represent a 22% slide from Wednesday’s closing price.
Although Hari credited the company for improving its execution of strategic initiatives under CEO Lisa Su, the analyst cited concerns that the stock has already priced in improvements in its competitive position. Hari also warned that AMD’s primary competitors, Intel (INTC - Free Report) and NVIDIA (NVDA - Free Report) , would likely fight back if the company did steal some market share.
“If AMD were to gain meaningful traction with its new products (e.g. Ryzen CPU, Naples CPU, Vega GPU) in 2017, we believe Intel and Nvidia would be likely to fight back in late-2017 and/or 2018 in the form of pricing concessions,” he said.
AMD has been a darling stock for the past year or so, gaining more than 400% over the last 52 weeks. Nevertheless, Hari expects AMD to underperform the market after its investor day in May.
Project Scorpio
The analyst’s warning comes on the same day that Microsoft (MSFT - Free Report) revealed the technology inside its next Xbox system, codenamed “Project Scorpio.” Integral to the new console will be Microsoft’s new Scorpio Engine, a “system-on-chip” that was designed alongside AMD.
There were some rumors that Project Scorpio would feature AMD’s new Ryzen CPU technology, but that doesn’t seem to be the case. Last month, shares of slid after an unfavorable review of the Ryzen 7’s PC gaming performance.
Bottom Line
AMD remains a Zacks Rank #2 (Buy). The company has seen positive earnings estimate revisions, and our current consensus estimates suggest that this will be a year of impressive EPS and sales growth. While short-term volatility is always a possibility, there is plenty of strength here.
Which Stocks are Zacks Experts Talking About?
Stocks in today's headlines may be tempting buys, but how would you like a sneak peek at the stocks Zacks experts recommend? Starting today, for the next month, you can follow all of Zacks' private buys and sells in real time. You can track value and momentum stocks, ETFs, stocks under $10, options moves, insider trades, and stocks set to report positive earnings surprises (we've called them with 80%+ accuracy). Click here for all Zacks trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on INTC - FREE
Get the latest research report on MSFT - FREE
Get the latest research report on NVDA - FREE