Advanced Micro Devices’ (AMD) stature has substantially increased over the past several years. The chipmaker has released some great products which have eaten into its traditionally bigger rivals’ dominance. In tandem, the stock has outperformed and left analysts scrambling for the upgrade button. The relentless forward march has continued during the pandemic, too, with shares up by 107% year-to-date.
However, one top Wall Street analyst is standing firmly on the sidelines. Northland analyst Gus Richard believes the Street’s CY21 estimates for AMD are simply too high.
“We normally model to be in-line with consensus but can't get there in the case of our AMD's CY21 estimates,” the 5-star analyst said. “It may-be the case we have a faulty assumption but we still can't find it. We believe that there are aggressive sell-side estimates that are skewing consensus and setting the expectation for CY21 too high. While in our view AMD is well positioned, we remain on the sidelines until consensus estimates are in-line with what we believe is rational expectations.”
The analyst expects AMD’s CY21 tax rate to increase from his previously estimated 7% (consensus calls for even lower – at 4%) to 15% due to the “higher levels of profitability in CY20.”
As a result, Richard slashed his CY21 non-GAAP EPS forecast to $1.68, which is $0.25 below consensus estimates and “at the low-end of the range CY21 of non-GAAP earnings of $1.52 to $2.43.”
Accordingly, Richard reiterates a Market Perform (i.e. Hold) rating on AMD shares along with a $75 price target. Investors are looking at downside of 18% from current levels should Richard's target be met over the next months. (To watch Richard’s track record, click here)
In contrast, most of Richard’s colleagues claim AMD is still a Buy. The stock has a Moderate Buy consensus rating, based on 13 Buys, 6 Holds and 1 Sell. That said, the Street is not anticipating shares will move any higher, either; in fact, going by the $90.41 average price target, the stock is expected to be changing hands at ~3% discount. (See AMD stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.