By Senad Karaahmetovic
Northland Capital Markets analysts downgraded Advanced Micro Devices (NASDAQ:AMD) to Market Perform from Outperform with a $60 per share price target, which indicated a downside risk of over 3% relative to Friday’s closing price of $62.01.
The analysts see China headwinds delaying recovery in AMD shares. The demand in China will be “very slow to recover,” they argue, although ARM CPU market share gains are likely to continue in this country.
“We estimate that indigenous Chinese x86 demand is 20% to 25% of worldwide demand, and China-aligned countries likely account for an additional 5%. Indigenous demand in China for client computers has contracted sharply, and server demand has slowed,” they said in a client note.
Moreover, the analysts see increasing competition from Intel (NASDAQ:INTC) as the latter will have “access to better transistors in desktop CPUs in CY23, and laptop and servers in CY24 and at a minimum slow the loss of market share.”
Overall, Northland sits below the consensus on AMD CY23 non-GAAP, revenue, and gross margin estimates.
“We also do not believe many analysts adjusted forward estimates post pre-announcement. While the buyside knows forward estimates are stale, we don’t think investors are prepared for the likely number cuts that are coming when the Company guides CY23 in January,” they concluded.
AMD stock price is down 1.5% in pre-market trading on Monday.