Analysts Are Neutral on AMD, Negative on Intel

Analysts’ recommendations for Intel

Goldman Sachs has been bearish on Advanced Micro Devices (AMD) for a long time. However, Goldman Sachs turned positive on AMD due to the company’s potential to gain market share from rival Intel (INTC) in the PC and server processor markets. Intel has delayed the production on its 10nm (nanometer) node twice. Now, Intel expects its 10nm chips to be available during the holidays in 2019.

Analysts Are Neutral on AMD, Negative on Intel

According to a CNBC article, Goldman Sachs downgraded Intel from “neutral” to “sell” and lowered its target price from $49 to $44, which represents a downside of 6.72% from the current trading price. Goldman Sachs analyst Toshiya Hari stated that the continuous delay in the production of Intel’s next-generation 10nm chips would likely have a negative impact on the company’s competitive position across a range of products. He added that the delay would encourage Intel’s customers to look for AMD’s products, which would impact Intel’s market share.

Intel’s earnings remain strong because the demand is strong in the enterprise market. Toshiya Hari stated that if enterprise spending slows down, it would impact the overall demand environment and reduce Intel’s earnings.

AMD’s earnings estimate

Speaking of earnings, analysts have revised their earnings estimate for AMD. A slight gain in the server processor market share would significantly increase AMD’s earnings. Analysts revised AMD’s 2019 EPS growth estimate from 30.5% to 33%. Analysts retained their revenue growth estimate at 9%. They revised AMD’s 2020 EPS growth estimate from 38.2% to 44.5% and the 2020 revenue growth estimate from 6.2% to 13%.

Analysts have a median target price of $16 for AMD—a downside of 17% from the current trading price. AMD’s stock has already priced in strong earnings growth.

Analysts might increase the target price if AMD continues to report better-than-expected earnings, which would increase its earnings estimates. However, a higher stock price would depict investors’ higher expectations. Any negative news would have a big influence on AMD stock.