Advanced Micro Devices (NASDAQ:AMD) stock is down significantly this year amid rising interest rates and declining demand. AMD and other chip makers witnessed a pandemic-led surge in personal computer (PCs) shipments. However, recent results reflected the slump in demand for PC processors, now that COVID lockdowns have ended. That said, most analysts remain optimistic about AMD due to the strength in its Data Center and Embedded segments.
AMD Focusing on Prospects Beyond the Weak PC MarketAMD’s Q3 revenue grew 29% year-over-year to $5.6 billion, even as revenue from the Client segment fell 40% due to weakness in the PC market. The company benefited from higher revenue from the Data Center, Gaming, and Embedded segments. The Embedded segment's revenue jumped to $1.3 billion from $79 million, reflecting the impact of the Xilinx acquisition.
Meanwhile, Data Center segment's revenue surged 45% to $1.6 billion. The company stated that Q3 marked the 10th straight quarter of record server processor sales, fueled by solid demand for third-generation EPYC processors. Additionally, the segment gained from the initial shipments of its 4th Generation EPYC central processing units (CPUs), called Genoa, to select customers.
AMD is confident about the long-term growth and share gains of its Data Center business based on the extensive family of its CPUs, GPUs (graphics processing unit), FPGAs (field programmable gate array), adaptive SoCs, and data processing units (DPUs).
The prospects of AMD’s Embedded segment also seem appealing given the demand from clients in the automotive, networking, communications, and aerospace and defense markets.
AMD expects its full-year revenue to rise about 43%, driven by the growth in the Embedded and Data Center segments.
What are Analysts Saying About AMD?Following the Q3 print, Mizuho Securities analyst Vijay Rakesh lowered the price target for AMD stock to $95 from $102 to reflect near-term macro challenges and “investor sentiment into a potential slowdown.” The analyst cautioned that the PC market has yet to bottom.
Nonetheless, Rakesh reiterated a Buy rating on AMD stock as he is positive about AMD’s Data Center segment, with the company ramping Genoa into the first half of 2023.
Overall, the Street’s Moderate Buy consensus rating for Advanced Micro Devices stock is based on 17 Buys and nine Holds. The average AMD stock price target of $85.62 implies 34.1% upside potential. Shares have plummeted 56% year-to-date.
ConclusionAMD stock might remain under pressure over the near term due to the lackluster demand in the PC market. That said, most analysts continue to be bullish about the company’s long-term prospects based on its strong fundamentals, solid cash flows (cash from operations increased 14% to $965 million in Q3), and the growth potential of the Data Center and Embedded segments.
Advanced Micro Devices (NASDAQ:AMD) stock is down significantly this year amid rising interest rates and declining demand. AMD and other chip makers witnessed a pandemic-led surge in personal computer (PCs) shipments. However, recent results reflected the slump in demand for PC processors. That said, most analysts remain optimistic about AMD due to the strength in its Data Center and Embedded segments.
AMD Focusing on Prospects Beyond the Weak PC MarketAMD’s Q3 revenue grew 29% year-over-year to $5.6 billion, even as revenue from the Client segment fell 40% due to weakness in the PC market. The company benefited from higher revenue from the Data Center, Gaming, and Embedded segments. The Embedded segment's revenue jumped to $1.3 billion from $79 million, reflecting the impact of the Xilinx acquisition.
Meanwhile, Data Center segment's revenue surged 45% to $1.6 billion. The company stated that Q3 marked the 10th straight quarter of record server processor sales, fueled by solid demand for third-generation EPYC processors. Additionally, the segment gained from the initial shipments of its 4th Generation EPYC central processing units (CPUs), called Genoa, to select customers.
AMD is confident about the long-term growth and share gains of its Data Center business based on the extensive family of its CPUs, GPUs (graphics processing unit), FPGAs (field programmable gate array), adaptive SoCs, and data processing units (DPUs).
The prospects of AMD’s Embedded segment also seem appealing given the demand from clients in the automotive, networking, communications, and aerospace and defense markets.
AMD expects its full-year revenue to rise about 43%, driven by the growth in the Embedded and Data Center segments.
What are Analysts Saying About AMD?Following the Q3 print, Mizuho Securities analyst Vijay Rakesh lowered the price target for AMD stock to $95 from $102 to reflect near-term macro challenges and “investor sentiment into a potential slowdown.” The analyst cautioned that the PC market has yet to bottom.
Nonetheless, Rakesh reiterated a Buy rating on AMD stock as he is positive about AMD’s Data Center segment, with the company ramping Genoa into the first half of 2023.
Overall, the Street’s Moderate Buy consensus rating for Advanced Micro Devices stock is based on 17 Buys and nine Holds. The average AMD stock price target of $85.62 implies 34.1% upside potential. Shares have plummeted 56% year-to-date.
ConclusionAMD stock might remain under pressure over the near term due to the lackluster demand in the PC market. That said, most analysts continue to be bullish about the company’s long-term prospects based on its strong fundamentals, solid cash flows (cash from operations increased 14% to $965 million in Q3), and the growth potential of the Data Center and Embedded segments.