Mizuho downgrades AMD with September quarter shipments seen tracking down, stock’s rally seen over
Advanced Micro Devices Inc. shares are falling in Thursday morning trading after Mizuho analyst Vijay Rakesh downgraded the stock to neutral on concern about September quarter shipments, while a strong rally this year has left limited room for upside.
Rakesh is concerned about a buildup in personal computers during the first half of the year, which could prove a “drag” on the second half. He said that while June-quarter PC shipments appear to be tracking “significantly stronger” due to concerns about future tariff activity, September-quarter notebook shipments look to be tracking down from the prior quarter.
AMD shares AMD, -1.79% are off 1.4% in Thursday’s session.
Other sources of worry for Rakesh concern AMD’s server and data-center trends. He wrote that AMD’s Rome ramp remains slow going into the third quarter, which “could point to slower 2H19 server share gains and gross-margin upside.” Product-volume ramps may not occur until later this year or early next, he said.
“While we have noted overall server supply chains seeing less dislocation from tariffs with much of the relocation done, we believe second-half hyperscale/data-center spending might not see the big 20-30% rebound from the weakness in 1H19 which, combined with slower PCs and competitive Intel INTC, +1.11% pricing, could limit second-half upside.”
Rakesh raised his price target to $37 from $33 in his note to clients. AMD shares have jumped 80% so far this year, while the PHLX Semiconductor Index SOX, +1.54% has gained 31% and the S&P 500 SPX, +0.36% has risen 19%. Rakesh said he would reevaluate his position upon “a more attractive entry point as the long-term road map is still intact.”
AMD is due to report second-quarter earnings on Tuesday, July 30.