Morgan Stanley Says Its Bearish Call on AMD Stock Was Wrong
By Tae Kim
June 6, 2019 10:25 a.m. ET
barrons.com
Wall Street generally does not like to talk about its mistakes. But Morgan Stanley now acknowledges it messed up with its bearish call on Advanced Micro Devices.
The chip company makes processors that act as the main computing brains for PCs, servers, and graphics cards, competing with Intel (INTC) and Nvidia (NVDA).
The back story. AMD stock (ticker: AMD) has risen more than 60% so far this year as investors have grown optimistic about the company’s product pipeline for 2019.
Last month, AMD unveiled its new “Zen 2” family of desktop processors, which will be available for sale on July 7. The chips are estimated to outperform AMD’s previous generation by up to 15% in terms of IPC [instructions per clock]. AMD also confirmed its Rome server chips will be released in the third quarter.
Earlier this week, the chip maker announced a multiyear strategic partnership with Samsung Electronics . AMD said it will license its graphics technology to Samsung for use in mobile devices and smartphones. Samsung will pay AMD royalties and license fees.
What’s new. Morgan Stanley analyst Joseph Moore on Thursday raised his rating on AMD stock from Underweight to Equal-weight, predicting the chipmaker will likely gain market share next year.
“Being cautious on the stock has obviously been the wrong call, even though we were right on some aspects,” Moore wrote. “While our earnings concerns over the last 12 months have played out and [second half] numbers still look high, the table is set well for 2020 and there are positive near-term catalysts.”
AMD stock rose 4.2% on Thursday, to $30.75 per share.
Moore said some leading PC manufacturers told him they plan on using more AMD desktop and server chips next year. The feedback was more positive than he expected.
“Where we had previously assumed that the shares gains would slow next year, that now seems less likely,” he wrote.
Looking ahead. Moore also raised his price target for AMD stock from $17 to $28.
In December, Barron’s suggested AMD could be a big winner this year because it has a promising lineup of products. |
