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Why Intel's CEO Transition Is A Negative For AMD: Analyst

Shanthi Rexaline
·2 min read

Intel Corporation (NASDAQ: INTC) shares have reacted positively to the company's announcement concerning the appointment of VMware, Inc. (NYSE: VMW) top brass Pat Gelsinger as its CEO.

In a sympathy move, shares of rival chipmaker Advanced Micro Devices, Inc. (NASDAQ: AMD) pulled back, as investors perceive Intel's move as negative for the company.

The AMD Analyst: BMO Capital Markets analyst Ambrish Srivastava downgraded AMD from Market Perform to Underperform and reduced the price target from $80 to $75.

The AMD Thesis: AMD has done a "tremendous" job under CEO Lisa Su, Srivastava said in the downgrade note.

The valuation of AMD shares reflected the near-flawless execution under Su, the analyst said. 

Intel's missteps opened up a "blue sky" scenario for AMD, helping it to gain market share at the expense of Intel, driving its valuation even higher, he said. 

Related Link: AMD Analyst Projects Strong Start To 2021 For Chipmaker

AMD's share gains in servers will likely moderate in 2020, as a result of which the consensus estimates will prove optimistic, Srivastava said. 

BMO said its price target assumes AMD continuing to trade at a rich valuation, although lower than where it is currently trading.

The price target assumes AMD shares trading at a PE multiple of 35 times the firm's calendar year 2022 EPS estimate of $2.15.

AMD Price Action: AMD shares lost 1.08% Thursday, closing at $90.79, following a 3.8% pullback Wednesday.

Related Link: Option Trader Bets M On Advanced Micro Devices Following CES Presentation

Photo: VMWare.

Latest Ratings for AMD

Date

Firm

Action

From

To

Jan 2021

Cowen & Co.

Maintains

Outperform

Jan 2021

BMO Capital

Downgrades

Market Perform

Underperform

Nov 2020

Wells Fargo

Upgrades

Equal-Weight

Overweight

View More Analyst Ratings for AMD
View the Latest Analyst Ratings

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