February 14, 2023 2:10 p.m. | 2 minutes read
Benchmark analyst Cody Acree kept Advanced Micro Devices Inc (NASDAQ:AMD) on Buy, increasing the target price to $103 from $93.
Late last week, Acree spent about an hour speaking with Ruth Cotter, AMD’s senior VP of marketing, human resources, and investor relations.
Cotter brought much color to the more prominent issues of AMD’s belief in its long-term market share gains in the client computing market and the data center and embedded processing markets.
At high levels, AMD noted that it is operating within rapidly changing demand trends in its client computing, gaming and data center markets, most of which started positively into the first half of 2022, which was followed by a significant weakening in customer demand during the second half of last year and this weakness has now become even more persistent in the first few months of Q1 23.
But even given the market’s weaker start in 2023, AMD remains very bullish on its market share gains. Within the broader computing market, unsurprisingly, AMD expects continued weakness into the first half of 2023.
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AMD expected customer shipments to bottom in March quarter followed by relative stability in June, AMD also forecasts a much stronger 2H23.
AMD focuses on the premium portion of the desktop and notebook markets, targeting leading OEMs such as Dell Technologies Inc (NYSE: DELL), Lenovo Group Ltd (OTC: LNVGY) and HP Inc (NYSE: HPQ).
As AMD is attempting to estimate the excess level of channel inventory and is currently shipping approximately 10% under consumption, the company currently estimates that there will be approximately 7-8 weeks of excess inventory in the channel.
AMD expects to generate a growing revenue base from these enterprise OEMs over the next several months. Regardless of near-term budget adjustments, AMD believes its data center business can grow 20% annually in 2023.
In terms of the company’s gross margin potential, AMD sees the most important element driving its gross margin results as simply being product mix, with the lowest ASPs and gross margin contributions coming from its North American hyper-scale cloud provider business.
Price Action: AMD shares traded 2.384% higher to $85.09 on the latest check Tuesday.
Photo by cebbi from Pixabay
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