Will Advanced Micro Devices stock rise to $200? One Wall Street firm thinks so.
Increasing demand for Advanced micro devices‘ (NASDAQ:AMD) Data center chips drove the stock to a high of $227 earlier this year. According to Wedbush, the stock is currently below that high – around $157 – offering an attractive entry point.
The firm maintained its Outperform (Buy) rating on the stock this week and also maintained its price target at $200, representing 27% upside potential from the current share price.
Wedbush is bullish on AMD’s recent acquisition of ZT Ssystems, a leading provider of artificial intelligence (AI) infrastructure for data center operators. Here’s what it means for AMD’s growth and why it could help the stock return to its previous high.
Why buy AMD shares?
On Monday, AMD announced the acquisition of ZT Systems in a cash and stock deal. “ZT brings world-class expertise in systems design and rack-scale solutions that will significantly strengthen our data center AI systems and customer support capabilities,” AMD CEO Lisa Su said in a statement.
Some investors see the takeover as a desperate attempt to catch up NVIDIAwhich dominates the market for high-performance graphics processing units (GPUs) and AI systems for data centers.
Wedbush disagrees. The company likes that AMD was able to acquire ZT at a cheaper price. AMD will try to sell ZT’s manufacturing assets and keep the more valuable design and services business.
Most importantly, Wedbush sees the $4.9 billion deal as a validation of AMD’s growth opportunities in the $236 billion data center market. AMD is growing too. The company’s revenue grew 115% year-on-year last quarter, and the acquisition of ZT Systems should only further strengthen the company’s offering to the world’s leading data center providers.
AMD is still seeing weak demand in other business areas, such as gaming GPUs, but once the company gets back up to speed, the stock could well exceed analysts’ price target.
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John Ballard holds positions in Advanced Micro Devices and Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
Will Advanced Micro Devices Stock Rise to $200? 1 Wall Street Firm Thinks So. was originally published by The Motley Fool
