By Louis Juricic
Shares of semiconductor maker AMD (NASDAQ:AMD) declined Tuesday morning after it was downgraded from Outperform to Market-Perform by analysts at Bernstein. Bernstein also cut its price target on the stock from $95 to $80, citing a worsening PC environment.
The downgrade of AMD comes just one day after the stock was upgraded by analysts at Barclays. That upgrade helped the stock climb 9% on Monday, outpacing broader gains in tech, but shares were back down 2% Tuesday morning following the Bernstein report.
“…our belief that AMD would prove relatively more immune to channel degradation proved unfortunately incorrect, and in recent months we have been growing more wary of potential PC dynamics, both given the market outlook as well as exacerbated by Intel's semi-destructive behavior as of late as they use both price and capacity as a strategic weapon, continuing to overship even amid broader breakdowns in the industry," wrote analysts.
They see Intel’s offerings are much more competitive in the client space, and they are concerned about seeing AMD's new client parts available at heavy discounts at retail less than two months after launch.
The Bernstein analysts cautioned, “Coupled with costs going up we see potential for incremental risk to gross margins on top of the broader macro and market worries that at this point are more expected. Street numbers call for gross margin expansion going forward into the 2H which might be somewhat optimistic unless current client trends prove transitory (we are not convinced they are). Hence we see incremental risk to estimates above and beyond potential market headwinds.”
AMD’s multiple is not hugely aggressive, analysts noted, but think it is unlikely to see multiple expansions until investors can get a sense of the bottom.