Advanced Micro Devices Inc. likely wouldn’t be immune to the effects of a recession, but Northland Capital Markets analyst Gus Richard said that risk is already baked into AMD’s stock price.
While he brought down various estimates on AMD AMD, -1.95% Thursday and cut his price target to $95 from $97, he also turned bullish on the stock, upgrading it to outperform from market perform.
Richard noted that AMD shares have fallen roughly in half from their November peak, and a key valuation metric has come down as well. The stock currently trades at 16 times estimates for 2023, compared with 32 times 2023 estimates as of the beginning of this year.
“We believe macro headwinds are now in our estimates and the share price,” he wrote.
Richard now expects that AMD’s revenue from PC CPUs will fall 6% next year, while GPY revenue could drop 7%. “AMD in servers CPUs is at the top of the stack next year we believe AMD will see little impact on this business in CY23,” he added.
Overall, Richard models CPU and GPU revenue dropping by a combined $675 million on a year-over-year basis in 2023. He further expects Xilinx revenue to decline 6% “on an apples-to-apples comparison” but highlighted that AMD closed its Xilinx acquisition in the middle of the first quarter, so accordingly, he thinks Xilinx revenue will tick up by $250 million in 2023. And while he believes that game console revenue could rise 8% in the next calendar year, he took down his own estimates for the category by $740. Finally, he models a 55% uptick in enterprise revenue, equating to a $3.1 billion increase.
“We believe these estimates are a low bar for the company,” he wrote.
AMD shares are off 0.7% in Thursday trading. They’ve slipped 35% over the past three months as the S&P 500 SPX, -0.88% has fallen 18%.