Citigroup has just increased its target price on the AMD share by 459%. Here’s why.
managed to reverse a long-standing decline on Thursday after the chipmaker accelerated market share gains in server processors to the detriment of its rival
analyst Christophe Danely upgraded its call on AMD (ticker: AMD) stocks to Sell Neutral, and increased its price target to $ 95 from $ 17, a peak of 459%.
Danely wrote in a note on Thursday that his team’s checks suggest AMD is taking market share from Intel (INTC) – gaining 1.5% in the first quarter – for the first time in 15 years. He predicts that the gains will continue and that AMD will achieve a 20% market share by the end of 2022, close to the company’s previous peak. In early 2019, AMD had a stake of around 2.5% in server multiprocessing units, according to data from Citi.
AMD’s share gains are expected to last for at least two years, he said, benefiting among other things from ongoing production issues at Intel. Intel’s next-generation production technology will suffer from delays, the analyst predicted. Production delays likely mean that Intel’s margins will shrink, as semiconductor makers typically increase their profits the longer a chip is produced.
For investors who agree with Danely’s thesis, the analyst recommends a pair swap: underweight Intel stocks while overweighting AMD stocks. A pair trade usually involves two stocks whose movements are inversely related: an investor runs or bets against one while going long on the other. Danely wrote that the risks to such a business include Intel fixing its production issues in a shorter timeframe than expected and AMD facing delays with its server chips.
Previously, Danely had justified its goal of a relatively low AMD price by predicting that Intel would engage in a price war with AMD and crush its advances in markets dominated by Intel. Danely wrote that he still sees a price war in CPUs as likely, and now expects it to start when personal computer sales cool and market share losses fall. ‘Intel will increase.
Despite Danely’s positive call on AMD and a video game equipment ad Featuring the company’s chips, shares fell 2.4% to close the regular session at $ 86.93. Intel stock fell 1.3%, to $ 55.81, amid widespread weakness in technology, including chip stocks, after
Semiconductor manufacturing in Taiwan
(TSM) announced its profits ahead of the opening bell Thursday. the
PHLX Semiconductor Index
Write to Max A. Cherney at [email protected]