On Monday, Evercore ISI initiated coverage on AMD (NASDAQ:AMD), assigning an Outperform rating with a $200 price target. The firm highlighted AMD's advantageous position in the evolving computing landscape, particularly in server central processing units (CPUs) and its MI300 series accelerators.
According to Evercore ISI, AMD is poised to benefit from the significant shift towards parallel processing. The company has already made considerable gains in the server CPU market, capturing a 20% unit share increase over the past five years due to its high-performance products. Evercore ISI forecasts continued market share growth for AMD, albeit at a potentially slower rate, and estimates the datacenter processor market could reach $80 billion by 2030, with AMD potentially seizing 20-30% of this market.
Analysts also noted AMD's progress in the PC CPU space, where it has increased its market share from 8% in 2016 to a projected 19% in 2023. They anticipate further growth opportunities, especially in high-performance desktops, notebooks, and with enterprise customers. However, the rate of market share gains may decelerate due to heightened competition from Intel and ARM-based competitors.
The acquisition of Xilinx in October 2020 was mentioned as a strategic move that could lead to over $10 billion in revenue synergies in the long term. Despite a current cyclical downturn in the FPGA business, analysts expect revenue synergies to start materializing in 2025 and build momentum through the end of the decade, potentially exceeding the firm's compound annual growth rate (CAGR) forecast of 17% through 2029.
Evercore ISI's $200 price target for AMD is based on a 24x price-to-earnings (P/E) ratio on their 2027 earnings per share (EPS) forecast of $10, discounted back two years at a 10% rate. This target reflects an expectation of P/E compression from the current 45x levels.