Northland analyst Gus Richard moved to the sidelines on both AMD (AMD) and Intel (INTC) on Monday. The analyst downgraded the former to Market Perform from Outperform, saying he sees AMD at "peak growth" and expects growth to slow in calendar 2022. Meanwhile, Richard also upgraded Intel to Market Perform from Underperform as he sees a sum-of-the-parts valuation providing support for the shares at current levels.
'THRILL GONE FOR NOW': Northland analyst Gus Richard downgraded AMD to Market Perform from Outperform with a $120 price target, down from $140. The analyst expects semiconductors, in general, to be weak next year as digital transformation and work from home demand slows. Meanwhile, inflation should be persistently high, pressuring multiples, Richard added. The analyst believes 2021 was "a peak growth year" for AMD and earnings growth should slow going forward. Richard is modeling revenue to increase 65% this year and non-GAAP earnings to grow by 104%, but expects revenue growth to slow to 21% in 2022 and non-GAAP earnings growth to slow to 30%. The growth headwind includes slower year-over-year growth in game console revenue from $3.5B, up 126% year-over-year in 2021, to $4.0B, up 14%, he said. Long-term, the analyst views the Xilinx (XLNX) acquisition as a positive for AMD as it broadens the company's end market exposure. However, in the near-term, it is a bit of a headwind, Richard acknowledged.
INTEL FOUNDRY CHANCES 'NOT ZERO': The analyst also upgraded Intel to Market Perform from Underperform with a $49 price target, up from $42. The "world desperately wants a second source" to TSMC (TSM) and while he doesn't give Intel's new CEO's plan "a high probability of being successful," the chances are "not zero either." Holding the stock back has been the company's lack of evolution over the last 15 years, he added. Richard believes Apple (AAPL), Amazon (AMZN), Facebook (FB), and Microsoft (MSFT) would welcome having a second source to TSMC with a fab in the U.S., though this may ultimately be Samsung (SSNLF). Given Intel's underperformance, the analyst believes a sum-of-the-parts valuation provides support for the shares at current levels.
PRICE ACTION: In Monday morning trading, shares of AMD and Intel have each gained about 1%, to trade at $121.02 and $49.33, respectively.
Samsung
+ (+0.00%)
Microsoft
-4.41 (-1.33%)
Ticker changed to META
+7.3 (+2.26%)
Amazon.com
-29.42 (-0.87%)
Apple
-1.095 (-0.73%)
TSMC
+0.23 (+0.20%)
Xilinx
+0.34 (+0.19%)
Intel
+0.32 (+0.65%)
AMD
+0.76 (+0.63%)