Advanced Micro Devices (NASDAQ:AMD) stock has extended its decline in pre-market Wednesday as Street analysts weighed in to discuss yesterday’s earnings release.
The stock was already down in Tuesday's after-hours trading amid a soft outlook, however, the AMD stock selloff extended into today’s pre-market session to -7.5% after BofA analysts downgraded to Neutral from Buy.
They now see a balanced risk-reward for AMD stock while their new price target of $95 per share signals a 14% upside potential relative to the pre-open indicative price of $83.25 per share.
While they see an attractive compute total addressable market (TAM) on one side, they believe this is offset by rising competition.
"We continue to like AMD’s consistent execution and its breadth of product cycles in attractive compute/AI markets. However, in the near/medium-term we see a range of headwinds including: 1) Aggressive pricing/promotion pressure from main rival Intel; 2) Riskier ~50% HoH data center growth outlook in 2H against a restrained cloud capex environment (and our NVDA C2H of +20% HoH est.); 3) Improving, but still only modest position in AI accelerators (<5% mkt share in next 1-2 years) against NVDA; and 4) Limited headroom for PE multiple expansion from the 25x-30x range until topline re-accelerates back to historical levels," the analysts explained in a note.
They expect to see some level of recovery in AMD stock "as the company outlines its AI vision and potential for growth in its unique converged AI (MI300) product," although they don’t see a potential for a significant recovery in the near term.