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Bank of America says AMD is a top pick because of its ‘generational opportunity’ to gain share against Intel

AMD’s market share in the server and desktop chip market will surge in the next two years, according to Bank of America Merrill Lynch.

The firm’s analyst, Vivek Arya, raised his price target for the company’s shares to $20 from $17, representing 27 percent upside to Friday’s closing price. He said AMD will likely generate higher profit margins from its new products.

He forecasts the company’s PC and server chip market share in dollars will rise to 5 percent by year-end from 3.6 percent last year. Arya also forecasts 7 percent market share for AMD in 2019. The company’s new server chips are priced two to three times higher than its older products, he noted.

“We believe the street continues to underappreciate the pricing/GM [gross profit margin] upside from AMD’s mix-shift to newer Ryzen and EPYC server products, which can more than offset any risk from graphics cards sold to crypto miners,” Arya said in a note to clients Monday. “Execution is key, and Intel’s incumbency and resources cannot be taken lightly, but we believe AMD has a generational opportunity to become materially bigger in computing.”

Looking at the company’s trading chart, the price is still in a free fall during the first trading session of the week, and I expect this to be maintained with slight corrections.

For good entrance levels we take this about 50% Fibonacci of the rising trend. There is also diagonal support at these levels.

After a price action signal we enter long with a stop around 12.35 (below 61.8 Fibo).

Alternative scenario: If a bar closes successfully below 61.8% Fibo, we believe the rising trend is over.

Chart: Used with permission of Bloomberg Finance L.P.

Source: CNBC


 Trader Aleksandar Kumanov


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