AMD Stock: Next Stop, $30?

support@smarteranalyst.com (Ben Mahaney)
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Earlier this month, Google formally announced that Advanced Micro Devices’ (AMD) would get the job to power its new Stadia cloud-gaming platform. While AMD had said this much in January, Google’s confirmation helped drive the stock up 12% since the announcement, as the relationship provides a big boost to AMD’s data center business. AMD’s custom-made GPUs will be based on its Vega architecture and provide 2x faster raw computing power than the PlayStation 4 Pro, and nearly double that of the Xbox One X.

Jefferies analyst Mark Lipacis, one of the biggest bulls among analysts on AMD, believes there's more room for upside as he reiterated an Outperform rating on the stock with a price target of $30.

Lipacis is also one of the top-rated analysts rated who cover the stock. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Lipacis has a yearly average return of 27.2% and a 73% success rate. Lipacis has an average return of 53.4% when recommending AMD and is ranked #14 out of 5,251 analysts.

Lipacis believes AMD and Google have a “close relationship,” as the two “appeared to have worked together to produce a custom GPU for the Stadia service,” as well as “AMD's CEO presence at the Stadia announcement, and...the conspicuous absence of Intel from the announcement. Given this, the analyst also increasingly believes that “Google will ultimately announce that it will use AMD EPYC 2 server MPUs”.

If this holds true, according to the analyst, it’d be a gold mine. Lipacis says he “would view a server MPU announcement between AMD and Google as being more important than a GPU announcement for cloud gaming because the latter market is nascent and the former is a $25 billion a year market.”

Besides the announcement, AMD investors are getting excited for the release of its 7nm processor chip. This is expected to come in 2019, and provide the company was a boost as rival Intel is still having production challenges with its 10nm chip. Though smaller, the new 7nm chip is more efficient than its larger competition and predecessors, delivering more power while using less energy.

All in all, 2018 was a roller coaster year for AMD stock. Its stock initially grew more than 200%, but plummeted nearly 50% at the end of year. Now, the stock is back up 50% from its 2018-low. Investors are increasingly excited on the soon-to-be-released 7nm chip, which should continue powering the stock forward. TipRanks analysis of 20 analyst ratings on AMD shows a consensus Moderate Buy, with ten recommending Buy, nine recommending hold and one saying Sell. However, the price target among these analysts stand at 25.94, suggesting the stock has a very limited upside ahead.

 

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