By Sam Boughedda
Morgan Stanley analyst Joseph Moore resumed coverage on Advanced Micro Devices Inc (NASDAQ:AMD) Wednesday with an Overweight rating and $103 price target, telling investors in a note that after the recent selloff, AMD offers potential for solid numbers at a reasonable valuation.
Moore explained that a digestion phase in PCs and consoles appears likely, and Morgan Stanley is budgeting for some caution next year. However, they believe strength in the server market (with further market share gains) should allow the company to keep posting solid growth at a now-reasonable valuation.
"AMD remains in a share gain position over the next couple of years at least, with the company likely to continue to take share in cloud servers as supply constraints ease. While the demand picture across all of the end markets is mixed given the plateauing economy, we think that the stock has over-corrected - we see share gains and mix improvement allowing them to power through more than most with double digit growth next year, and with the stock down over 48% from its 4Q21 highs, we see the risks as largely priced in," said Moore. "We are modestly above consensus on CY22 numbers, and while we are well below for CY23, we would argue that current anxieties reflect a worse outcome despite stale sell side numbers."
The analyst put AMD's sharp sell-off down to macro concerns impacting the consumer side of their business, with PC processors, graphics, and consoles making up 55% of revenues, with Morgan Stanley anticipating a "meaningful correction in PC in the next few quarters."
"We note that we are below consensus for CY23, for AMD and for every other stock in our coverage, but we see AMD as closer to consensus than peers, at a valuation that has already corrected more than other high growth companies such as MRVL and NVDA."