On Tuesday, Wolfe Research shared concerns regarding Advanced Micro Devices, Inc. (NASDAQ: NASDAQ:AMD), expressing skepticism about the company's upcoming earnings report in January.
With AMD currently commanding a market capitalization of $205.6 billion and trading at a P/E ratio of 112.5, the analyst firm indicated that it might be challenging for AMD to meet the high expectations set by the market, particularly with a projected $10 billion in revenue.
According to InvestingPro data, AMD's current Fair Value analysis suggests the stock is fairly valued, with analysts maintaining a bullish consensus recommendation of 1.65 (1.0 being strongest buy).
The firm anticipates that AMD could provide a guidance figure around $7 billion, which may lead to expectations of an upward revision in the future. However, Wolfe Research cautioned that AMD might not have the ability to increase this guidance later on. This uncertainty, according to the firm, could potentially raise concerns among investors and analysts.
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In addition to their caution about the January earnings, Wolfe Research also pointed to potential headwinds in the first quarter of the year. They expect AMD to report first-quarter revenue of $7.04 billion, slightly below the consensus estimate of $7.09 billion. This expectation is based on the typical slowdown in PC sales following a strong fourth quarter, which in 2024 was particularly robust.
Furthermore, the recovery of AMD's Xilinx business (NASDAQ:XLNX) is projected to be more likely in the second half of 2025 rather than the first half. This forecast aligns with broader expectations of a rebound in the analog sector during the latter part of the year.
The analyst firm concluded its comments by stating that their rating and estimates for AMD are currently under review as they continue to evaluate the potential impact of these factors on the company's performance. The review underscores the cautious stance Wolfe Research is taking as it monitors AMD's financial trajectory in the face of these challenges.
In other recent news, Broadcom (NASDAQ:AVGO) recently reported a 220% annual increase in artificial intelligence (AI) revenue, primarily driven by demand for its custom AI chips. This surge led to an overall boost in the semiconductor sector.
Analysts from Morgan Stanley (NYSE:MS) and Raymond (NS:RYMD) James acknowledged these robust results, adjusting their price target for Broadcom and maintaining a Market Perform rating, respectively. However, they also expressed caution regarding long-term market share and SAM estimates.
On a similar note, Advanced Micro Devices (AMD) has been experiencing shifts in market perception. BofA Securities downgraded its rating on AMD from "Buy" to "Neutral" due to concerns about increased AI competition and potential fluctuations in PC processor sales. Despite this, AMD's CFO, Jean Hu, highlighted the company's market share growth in the server CPU and PC markets at a recent conference.
In other developments, AMD, along with Nvidia Corp . (NASDAQ:NVDA) and Intel (NASDAQ:INTC) Capital, invested in Ayar Labs Inc., a company innovating in optical data transfer technology. This investment signals a strategic move towards more efficient AI processing.
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