Advanced Micro Devices, Inc. (NASDAQ:NASDAQ) reported forecast-beating quarterly results on Tuesday and raised its full-year revenue guidance.
Despite the all-round outperformance, an analyst at KeyBanc Capital Markets deemed it fit to lower the price target for AMD stock.
The AMD Analyst: John Vinh maintained an Overweight rating on AMD shares and reduced the price target from $165 to $150.
The AMD Thesis: AMD's solid first-quarter results reflected strength in data center, which more than doubled year-over-year and offset the muted demand in client computing and graphics, Vinh noted.
The analyst noted that server growth continued to be strong, with both cloud and enterprise more than doubling from the year-ago period. Semi-custom revenue grew at a strong double-digit rate, driven by continued robust demand in the current game console cycle, the analyst said.
Data center, including GPU, accounted for a low 20% of overall first-quarter revenue, and it is expected to see another year of strong growth in 2022, Vinh said.
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Given softening PC demand, AMD lowered its 2022 PC industry outlook to down by high-single-digits vs. flat to down low-single-digit percentage estimated previously, the analyst noted. The company, however, expects its client PC revs to grow in the calendar year 2022, driven by mix shift to premium and gaming segments, he added.
The company raised its 2022 revenue growth guidance to 60%, up from 31% previously, reflecting 35% organic growth and low 20% growth for Xilinx, the analyst said.
The price target reduction, according to the analyst, is to account for a lower valuation multiple, which was taken down to align with the lowered peer group multiple. AMD's valuation multiple is still at a premium to peers and the premium is justified, given the company's outsized growth rate, he added.
AMD Price Action: In premarket trading, AMD shares were soaring 6.76% to $97.29, according to Benzinga Pro data.
