AMD shares gained as much as 6% Thursday after the company received a $40 price target — tied for the most bullish on Wall Street — at FBN Securities. However, they have surrendered those gains and are now trading down more than 2%.
"The company currently has a strong new product cycle driven by its Zen architecture, with Ryzen processors introduced for the PC market in 2017, fifth-generation graphics chips (with the introduction of Radeon RX Vega in 2017 and the Radeon Pro V340 in 2018), and EPYC processors for the enterprise server market all ramping well currently," analyst Shebly Seyrafi said in a note sent out to clients on Thursday.
The semiconductor company launched its first-generation Ryzen desktop and mobile CPUs based on its new "Zen" x86 architecture in 2017. The introduction of Ryzen increases AMD’s PC processor business from less than $10 billion to $30 billion, stealing CPU market share from its competitor Intel, and the introduction of Ryzen mobile allows AMD to play in more of the premium market, FBN says.
Intel has been struggling to produce 10-nanometer chips and delayed the rollout of next generation chips until at least 2019, while AMD is heading to launch its even smaller 7-nanometer EPYC processor around next summer year. That would be two years after the company firstly introduced its EPYC 7000 series of high-performance processors in June 2017.
AMD server chip could be a strong driver for total revenues, Seyrafi said. By his calculation, server CPU revenue could total $137 million in the coming fourth quarter, and rise to $392 million, or 20% of overall company revenue in the fourth quarter of 2020. Meanwhile, AMD will grab 5% of a 5.5 million CPU unit market share in the fourth quarter of 2018, up from 1.4% of a 4.9 million unit market in the second quarter, and hit 10% unit market share by the end of fiscal year 2020.
But Seyrafi cautioned that AMD’s semi-custom segment could decline next year due to its close relationship with Microsoft and Sony, both of which are unlikely to launch major new gaming consoles until 2020. Microsoft and Sony both contributed for more than 10% of AMD’s revenue in fiscal year 2017.
But FBN isn't the only one who has gotten more bullish on the chipmaker. AMD has seen a plethora of upgrades as of late.
Also on Thursday, Deutsche Bank analyst Ross Seymore lifted his price target to $23 from $14, but maintained his "hold" rating for AMD, noting the potential for competitive responses from Intel and Nvidia.
And last week, Jefferies analysts increased their price target to $30 from $22, emphasizing that AMD is easily beating Intel when it comes to microprocessors and has gained market share in notebooks.
AMD shares are up 180% this year.