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Previewing Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel (NASDAQ:INTC) ahead of their second quarter earnings releases (Intel July 28, AMD August 2), a BofA analyst said they favor AMD.
The analyst maintained a Buy rating and $110 price target on AMD while keeping Intel at Underperform with a $39 price target.
“We maintain our preference for AMD over INTC stock ahead of their upcoming Q2 earnings calls (INTC Jul-28, AMD Aug-2). Near-term INTC expectations are lower (well-known PC/enterprise headwinds) while a capex cut (tools shortage), US/Europe govt. stimulus could stabilize near-term cash flows enough to offset PC declines and provide a brief stock recovery.” said the analyst. “AMD however faces steeper expectations and could be exposed a reset in the graphics/crypto market. We look past near-term earnings volatility and focus on AMD’s compelling valuation, pipeline and management execution.”
Focusing on Intel, the analyst outlined their expectations for the earnings release: “We expect: 1) FY22 sales to be revised towards $72-$73bn (downside towards $70bn, below INTC’s $76bn, cons at $74.6bn) and pf-EPS to $3.22 (-39% YoY, below INTC’s $3.60 and cons. $3.40). 2) CQ3 sales of $18.3bn (downside to $17-$17.5bn on PC processor inventory reduction). Watch for Q3 GM, potential to dip towards 50% (cons 51.5%). We would view any relief rally in INTC stock as short-lived due to our structural strategic/financial concerns.”
On AMD, the analyst stated: “We expect inline Q2 but modest 2H headwinds with Q3/Q4 sales $6.6bn/$6.6bn, slightly below cons. $6.8/$7bn. Results from AMD’s main foundry TSMC were very encouraging (see report) and suggest to us that AMD has the pricing and mix (data center over PC, Xilinx accretion) strength to deliver close to 2H expectations.”
