Advance Micro Devices is positioned for big gains going forward despite concerns about slowing consumer demand and elevated inventory levels, according to Raymond James. The firm upgraded the stock Monday to a strong buy rating from overweight and increased its price target on it to $160, implying about 81% upside from its closing price Friday. "As we have become more concerned about cycle risks given potential for slowing consumer demand and elevated inventory levels at customers, we favor those semi companies with strong secular drivers, more muted cyclical exposure and attractive valuations, for which AMD appears well positioned," Raymond James semiconductor analyst Chris Caso said in a note Monday. The firm said it has confidence in AMD's role in the datacenter market and the company's potential to widen the technology gap with competitor Intel when its Genoa chip is released later this year. "With INTC's roadmap not showing parity with AMD until at least the end of 2024, we think continued share gains for AMD in datacenter are likely inevitable, and we believe tight supply conditions are encouraging customers to commit to AMD to ensure supply," Caso said. Caso also noted the PC market, of which AMD has just 15% market share, is a concern, but the company can still remain competitive. "We expect the market to move toward a sustained duopoly, which likely means that AMD continues to take significant share even if INTC executes to its roadmap," Caso said. "Our view is that if Intel executes flawlessly against their process roadmap (which is far from assured) and gets close to AMD's transistor performance by 2024/25, we don't think INTC would be able to maintain their currently dominant market share in client and server." The Wall Street firm also sees AMD's valuation as very attractive, noting that its shares have corrected "meaningfully" and that they now trade at almost parity to the S & P 500. "At just 18x CY23 non-GAAP EPS, shares remain well below their 40x average forward P/E over the last three and five years. Shares are down ~44% since November 2021 while the SOX is down ~22%," Caso said. — CNBC's Michael Bloom contributed reporting.
An Advanced Micro Devices computer chip.
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Advance Micro Devices is positioned for big gains going forward despite concerns about slowing consumer demand and elevated inventory levels, according to Raymond James.