AMD stock could hit $66, says Wall Street’s most upbeat analyst

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Shares of Advanced Micro Devices Inc. are up 1.7% in premarket trading Friday after RBC Capital Markets analyst Mitch Steves raised his price target on the stock to $66, which is now the highest target among analysts who cover the stock.

His new target, up from $63 previously, comes after a better-than-expected earnings report from AMD AMD, +1.19%  peer Nvidia Corp. NVDA, -0.65%, which indicated to Steves that the market for gaming chips is healthy and the coronavirus is unlikely to impact full-year 2020 results for AMD.

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“We are increasing our multiple on AMD due to higher conviction in overall demand for gaming and server chips,” he wrote. “We believe AMD has made the correct long-term bets that will pay off over the next 12 months and beyond.”

Steves is upbeat about AMD’s product offerings and has a positive view of the new products that could be coming out later this year. He’s also encouraged that AMD now seems to have more long-only investors.

“We’ve noticed a significant shift in investor interest from hedge funds to long-term investors due to the recent success of the EPYC 2 launch,” he wrote.

See also: Nvidia’s server sales spike, stock jumps

Steves is calling for an acceleration in sequential earnings-per-share growth as 2020 progresses due to an expectation that AMD will hit about 500,000 server units by the second quarter, an anticipated gaming-console ramp in the third quarter, and “scale-up” in next-generation servers throughout the second half of the year.

He rates the stock at outperform.

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AMD shares have added 42% over the past three months, while the S&P 500 SPX, -0.16%  has increased 9%.