Advanced Micro Devices (AMD) could get a bigger-than-expected lift in the third quarter from chips for video game devices and data centers, a Wall Street analyst said Friday. AMD stock has formed a base ahead of its third-quarter earnings report.


RBC Capital Markets analyst Mitch Steves reiterated his outperform rating on AMD stock and upped his price target to 92 from 84.

On the stock market today, AMD stock rose a fraction to 83.17.

“We are raising our estimates on AMD as we believe fundamentals remain strong for the firm,” Steves said in a note to clients. “Our checks on Gaming and Data Center suggest modest upside to numbers.”

AMD Earnings Overshadowed By Xilinx Chatter

A solid third-quarter report would help quell fears that AMD’s organic growth is weakening. Those fears were stoked by a news report that AMD is interested in buying Xilinx (XLNX), he said. The Wall Street Journal reported Oct. 8 that AMD was in advanced talks to purchase Xilinx in a deal worth more than $30 billion.

Santa Clara, Calif.-based AMD plans to report its third-quarter results on Oct. 27. Analysts expect it to earn 35 cents a share, up 94% year over year, on sales of $2.56 billion, up 42%.

AMD is benefiting from strong PC sales related to the work-from-home and online schooling trends spurred by the Covid-19 pandemic, Steves said. Plus, the pandemic is fueling home entertainment usage, including gaming PCs. AMD has been steadily gaining market share at the expense of PC chip leader Intel (INTC), Steves said.

Advanced Micro Devices makes central processing units, or CPUs, for personal computers and servers. It also makes graphics processing units, or GPUs, for PCs, gaming consoles and data centers.

AMD Stock Tops IBD 50 List

On Oct. 8, AMD announced its Ryzen 5000 series central processing units for desktop computers. It plans to introduce its Radeon RX 6000 series graphics cards on Oct. 28.

Also on the near-term horizon are next-generation video game consoles from Microsoft (MSFT) and Sony (SNE), both of which use custom AMD chips. Microsoft plans to release its Xbox Series X console on Nov. 10. Sony will follow on Nov. 12 with its PlayStation 5 console.

AMD stock ranks first on the IBD 50 list of top-performing growth stocks.

AMD stock has formed a cup-with-handle base with a buy point of 88.82, according to IBD MarketSmith charts.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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