Once again the battle lines are being drawn.
On one side, we have the traditional Wall Street investment community.
On the other, we have the social media crowd who rally around a stock they think is being treated unfairly by old school types.
Market Under Pressure
The semiconductor sector has been under pressure as the economy slows down and consumers’ buying power shrinks, pushing them to postpone buying non-priority items like electronic gadgets.
Semiconductor manufacturers, like tech companies, are also suffering from the tightening of monetary policy by the Federal Reserve.
While interest rate hikes are intended to curb inflation, they can also be a blow to growth.
Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report and the three other largest U.S. chip makers by market cap–Nvidia (NVDA) – Get NVIDIA Corporation Report, Intel (INTC) – Get Intel Corporation Report, and Micron (MU) – Get Micron Technology, Inc. Report recently lost nearly $110 billion in market value in a week.
AMD, which is scheduled to report first-quarter earnings on May 2, saw its share price fall 40.4% from $161.91 on Nov. 29 to about $96.45 on Tuesday.
Last week, Truist analyst William Stein slashed his price target on AMD to $111 from $144, while keeping a hold rating, according to The Fly.
Stein cited “hard evidence” of a sudden negative shift in demand signals from a wide range of compute, consumer, and communications original equipment manufacturers or OEMs, driving his recent of 2023 models to contemplate negative growth and lower earnings multiples for the industry.
‘Move to the Sidelines’
Stein said that while it is “challenging” to justify any downgrades, his conviction on semiconductors was now lower.
It was also last week that AMD said it had agreed to a $1.9 billion takeover of enterprise services start-up company Pensando.
AMD shares took a hit late last month when Barclays analyst Blayne Curtis lowered his rating on AMD to equal weight from overweight, while cutting his price target by around 22% to $115 per share, citing “cyclical risk across several end markets” looming in 2023.
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The company said in February that 2022 revenues should come in north of $21.5 billion, a 30% increase from last that that is also well ahead of the Refinitiv forecast of $19.25 billion, thanks to surging demand for its data center chips.
“We would rather move to the sidelines until we have better clarity as to the magnitude of these corrections and what the competitive landscape will look like as Intel catches up and ARM takes more share,” Curtis added.
However, several commenters on Reddit feel Wall Street is giving AMD short shrift.
“AMD is punished for no reason… WAIT IT OUT,” one person wrote last week. “Less than a decade ago, Wall Street was certain AMD was down for the count.”
The lengthy post dismissed several stock analysts as “clowns” none of whom “had the least clue about technology.”
“All of them were brushing off the console contracts AMD had secured with Microsoft and Sony. The Graphics IP from ATI and the strength of AMD in the budget PC market were all ignored.”
‘A Solid Book of Business’
“I am really looking forward to this earnings, because we can once again show to the wallstreet folks that AMD is a changed company with a lot fortune in the future,” one poster said on Reddit.
“I think they hit their target and reiterate guidance,” another commented. “There’s a lot of fear of a slowdown, but AMD should have a solid book of business.”
“It enrages me to see such enormous price drops on the back of analysts saying demand ‘might’ be slowing down,” another said. “They say absolutely nothing with conviction, and yet they tank the price. And then a top analyst comes out and says, WITH conviction, to the effect of ‘AMD will be fine, I advise buying, PT $200’, and nothing.”
“The price has come down such an absurd amount at this point, and is having just as absurd swings,” the commenter concluded.
Feelings were running equally high over on Twitter, where one commenter said “the sell-off on this stock is a galactic sea of Bullsh*t.”
“This stock is money, i aint worried… earnings gonna crush. lots of cash, M&A, and expanding product line. long term no brainer,” another person tweeted.
“I’m not touching my #NVDA stock and my #AMD for a loooong time!” another commenter said.