Advanced Micro Devices Inc. (NASDAQ: AMD) saw a serious giveback on Monday after a massive rally on Friday after earnings. AMD guided for non-GAAP operating profitability in the second half of 2016, although this is still a situation that remains difficult for many analysts and investors to agree on for the quarters and years ahead.

24/7 Wall St. has compiled data from many different analyst research reports. The aim is not to feature AMD just with a positive or a negative view.

One driving force for investors was AMD licensing its processor and system on a chip (SoC) technology to a joint venture for China’s server market. AMD also appears to be on track to begin its joint venture with Nantong Fujitsu. Both joint ventures should generate positive cash for AMD, and CEO Lisa Su was optimistic ahead of the second half of 2016.

Again, there are many views here that conflict with each other. The aim is to show a 360-degree view.

Credit Suisse said that it was maintaining its Underperform rating, but the firm did raise its price target to $3.50 from $1.90 in the call. The firm’s John Pitzer said:

Structurally we continue to worry that AMD has quickly lost scale with a less defined Moore’s Law Roadmap and an R&D budget which is down 50% since 2008 – as such, even as new revenue opportunities emerge we suspect AMD will need (and should) accelerate spending and hence profitability is likely to remain elusive. While we have argued that the stock price over the last 6 months undervalued the significant intellectual property (IP) at AMD, it was unclear how AMD would be able to monetize said IP – the THATIC JV helps to address that issue (albeit with more questions than answers) but not the significant performance gap between AMD and Intel especially in the data center market. We see the potential for Polaris share gains in graphics and custom silicon opportunity providing some basis for sequential Rev growth (already embedded in our estimates) but not to a sustainable path of positive earnings needed to upgrade our rating – albeit, we are increasing our target price from $1.90 to $3.50 to reflect better core business, attempts at monetizing IP, and diminishing solvency issues.

Jefferies reiterated its Buy rating on AMD on Friday, and it also raised its target, to $4.50 from $3.50. The firm is optimistic that more announcements will be made soon. The firm said:

AMD Beat 1Q and Raised 2Q outlook on new product visibility. Importantly, it announced a JV with a Chinese group to license its server technology to make x86 processors for the Chinese market for $193m in license fees and royalties on products sold. Our thesis has been that AMD has a unique set of IP (x86, ARM, Graphics, Server) that ultimately will get monetized – we wouldn’t be surprised to hear more announcements in the future.

Argus has a Hold rating for AMD. The firm warned about the CPU and graphics units:

Despite the uplift in the stock price, comparisons remain deeply negative for the producer of CPUs, embedded and semicustom chips. AMD reported first quarter revenue of $832 million, which despite beating expectations was down 19% year-over-year. AMD’s adjusted loss per share worsened year-over-year, to a loss of $0.12 per share for the first quarter versus a loss of $0.10 a year earlier.

The Computing & Graphics unit relatively outperformed expectations, with revenue declining 14%; the Street was looking for a high-teens decline. The semi-custom business was weak, however, with revenue dropping 25% year-over-year as momentum wanes in gaming consoles.

Given its extensive history of losses, AMD is tricky to value on conventional metrics. We believe the stock price has gotten ahead of realistic expectations. AMD is a long way from profitability, and we thus remain skeptical that the company can get to profitability by year-end. Intel’s recent guide-down in revenue growth for 2016 suggests mounting pressure in the PC space, where AMD is over-represented in less profitable niches such as lower-tier notebooks and emerging economy PCs. Much as we earlier would not chase AMD on price, now we choose not to chase newfound momentum in the stock.

Oppenheimer has an Underperform rating on AMD. Oppenheimer’s Rick Schafer has no formal price target, but his report said:

AMD reported 1Q sales/loss per share of $832M/($0.15), versus the Street’s $818M/($0.15). Management guided second quarter sales up a surprising 15% Q/Q to approximately $955 million at the midpoint, well above the Street at $888 million, largely driven by a semi-custom ramp. Most importantly, AMD announced a $293 million licensing agreement and joint venture with China company THATIC, aimed at developing server processors for the China market. The company is guiding to a return to non-GAAP operating profitability in the second half, as the company updates their product roadmap and aims to gain share in CPU/GPU, as well as ramp products in EESC. While the progress towards intellectual property monetization is encouraging, we maintain a wait-and-see stance with regard to AMD’s product outlook.

Bank of America Merrill Lynch’s Vivek Arya has an Underperform rating and a $2.30 price objective on AMD, noting that investors should look elsewhere instead. His report recommended not chasing momentum here as AMD’s fundamentals remain challenged. The report said:

Despite new China licensing deal, we see three more years of earnings per share losses for AMD on low profitability and high debt burden. AMD’s share gains in the first quarter are insufficient to us to predict turnaround since past enthusiasm has consistently proven temporary.

Our 12-month price objective of $2.30 for AMD is based on 0.85 times enterprise value (EV) to 2016E sales which is inline with its 5-year average and reflects our caution on future EPS growth prospects and competitive risks.

Downside risks are manufacturing transitions and execution at two different foundry partners, market share losses to Intel in PC client and server microprocessors, slowdown in graphics processors from a falling attach rate, high consumer PC exposure, and gross margin pressures from rising costs on new process nodes. Upside risks are potential for AMD to regain share from NVIDIA in discrete graphics chip market, pipeline of semicustom design wins, and possibility of gaining further exposure to higher growth enterprise PC market.

S&P Capital IQ has a Hold rating on AMD with a $3.50 price target for the next 12 months. Its report said:

We see revenue declining 3.7% in 2016, but rebounding 5.5% in 2017, following a 28% decline in 2015. Despite ongoing pressures within the PC space, we expect less pronounced declines over time. We question whether AMD can sustain its PC market share at current levels, as we remain cautious about competitive pressures. We anticipate growth within AMD’s enterprise, embedded and semi-custom segment (includes server business), although note recent softness. We note that over 50% of sales are currently coming outside of PCs and we expect AMD to further diversify its revenue base.

Several other key analyst calls on AMD were seen as follows:

• BMO Capital Markets has a Market Perform rating and raised its target price to $3.
• Craig Hallum raised its rating to Buy from Hold and raised its target price to $6 from $3.
• Deutsche Bank has a Hold rating and raised its price target to $3 from $2.
• MKM Partners raised its rating to Buy from Neutral and raised its price target $4 from $3.
• Raymond James has an Outperform rating and raised its price target to $3.50.
• Topeka Capital Markets has a Hold rating, and the firm raised its price target to $3 from $2.
• Wedbush Securities raised AMD’s target price to $3.50 from $2.00.
• Zacks Investment Research raised its rating last week to Hold from Sell.

AMD shares were up a whopping 52% at $3.99 on Friday, with some 143 million shares trading hands. Much of this was short covering (see below), and the stock was down 16% at $3.34 on about 50 million shares right at the midpoint of Monday’s trading session. AMD’s 52-week trading range is $1.61 to $3.99 — and that 52-week high was on Friday as well.

AMD saw its short interest drop off for the late March period to a total of 110.35 million shares short, with 7.7 days to cover. This current reading is the third lowest reading within the past 52 weeks. The previous reading was 135.83 million shares short with 8.5 days to cover. It’s also worth noting that most stocks in the Nasdaq don’t even come close to these numbers.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.