Advanced Micro Devices, Inc. (NASDAQ:AMD) is seeing some big wins against Intel Corporation. Time to buy AMD stock?
Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corporation (NASDAQ:INTC) have had contrasting runs on the bourses this year. AMD stock has risen by 17.3% year-to-date, a run which saw the stock swing from a low around the $9 level to a high of over $15 a share. In other words, shares of the Dr. Lisa Su led company have had a highly volatile run. In contrast, Santa Clara, California based Chipzilla Intel is up by 2.5% over the year, a run which has seen Intel stock move sideways for most of the time. While the two have had highly contrasting runs, AMD could be upping the game and hurting its bigger rival. To put it another way, while AMD stock increasingly looks a winner, Intel stockholders could be in for more pain. Here is why.
AMD Is Now A Competitor To Intel In The Server Market
After years of being an 'also ran', at least in the server market, AMD has come storming back, particularly in the server market. As we had written earlier, AMD is already winning big customers for its EPYC processors, which was proof of the fact that AMD was, once again, competitive with Intel's server offerings. As Joel Hruska of ExtremeTech writes, "This is the first time in at least six years that AMD has had a server part that could take the fight to Intel in any context." Initial reviews have started to pour in, and the conclusions are clear: While AMD might not have hit Intel out of the server market, it is once again competitive in a market where Intel dominated with a 99% market share.
Quoting Hruska once again, "The bottom line is this: AMD’s Epyc isn’t the better choice in every situation or environment. But a combination of lower prices, competitive performance, and some solid test wins show AMD can hang with Intel again, even at the top of the market. For hardware cost-conscious companies, or vendors that can afford to optimize heavily for Ryzen (cloud providers like MS, for example), Epyc is a very strong brand." And as we have said multiple times in the past, AMD need not necessarily crush Intel in this market. A competitive product will be good enough to capture significant server processor market share, which was also highlighted in a recent bullish report from research firm Jefferies. Analysts at the firm issued the stock with a buy rating and a $19 price target, implying a 43% upside from the last closing price.
AMD Is Winning The CPU Battle
The positive news doesn't end with the server processor market alone. Recent data from mindfactory.de, a German retailer suggests that not only is AMD competing with Intel in the CPU market, it, in fact, outsold the Chipzilla last month.
According to data from the German retailer, AMD accounted for 54% of total CPU revenue in August 2017, and a 56% share of the market, on a volume basis (see chart below).
While the above data does not reflect global trends, it does build on AMD's market share gains in Q2 2017, which saw AMD take a 10.4% share from Intel, its biggest quarterly gain ever. If the global trends are even remotely close to those reflected by the mindfactory.de numbers, AMD stockholders could be in for some serious gains.
AMD Stock Price Target And Short Interest
Not surprisingly, Wall Street Analysts are optimistic on AMD stock. Wall Street currently has a consensus target price of 14.23 on AMD stock, which is 7% above the last closing price. Not often, over the last 18 months, has AMD stock traded at a discount to the Wall Street consensus. And every time this has occurred, the stock price has swiftly climbed over the consensus target price. In other words, now might be a good time to go long AMD stock.
A rally from the current price levels could also be supported by a short squeeze. As we had covered in a recent post, AMD stock continues to be the most shorted (by volume) stock on Wall Street, with 16% of the float being short. The days to cover are near at a 12-month high of 3.4, implying that a rally higher could force a short squeeze.
To sum up, AMD's gains over Intel, both in the CPU market as well as the server processor market, combined with the optimism on Wall Street make AMD stock ripe for a solid bull run. In addition, the high short interest makes AMD a potential short squeeze candidate, which could add fuel to a rally in the stock price.
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